Tax question for OOT

[beenben]

First off, although I'm a lawyer, I'm not a tax lawyer and I did not research this properly. I'm just giving you a semi-educated guess.

1) when the money is held in trust, it doesn't belong to anyone. However, when the attorney pays himself his fee, that is income because income is any benefit derived; and his 1/3 or whatever of your settlment is income to him that he or his firm are taxed on. But- if this is a worker's compensation or personal injury settlement, it is not taxable pursuant to 26 U.S.C.A. § 104.
(however, punitive damages are taxable).

I'm not sure who sends 1099 or if that's the right form, but I'm pretty sure you don't send one to your attorney.