DH is a new big law partner and I have no clue how to budget

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:My take on this is that OP and others are humble bragging about having spouses making lots of money in big law.

-- Biglaw partner whose spouse has never found any of this to be "so complicated"

I think that's a bit cynical. My firm has a series of onboarding events/trainings for new partners (and even for associates or counsel who are putting themselves up for partner) to make sure they understand and prepare for the new tax situation that comes with making partner. Since OP's DH is taking a strangely laissez faire attitude toward the question and she knows budgeting is not her strong point, I think it's perfectly reasonable to come to the one place on the internet where all BigLaw SAHM's can be found at any given moment for advice.

-- Biglaw senior associate who has no plans on making partner but has witnessed the transition go poorly for certain colleagues

What firm provides partner "tax training" for associates who aren't partners yet? That's odd.

In any event, it's just not all that complicated. Just be careful for the first year and after that go on prior experience. And if after being careful you still find that you have to tap a line of credit because your numbers were off, no biggie.

You definitely think you're bragging that it's "not complicated" but really you're just demonstrating that, even as a law firm partner, you don't make that much money (or aren't at a top/global firm). Anyone making seven figures, which gets distributed a year after it's earned, in random huge chunks throughout the year, including what one must LATER pay in taxes to several countries and states at equally random dates, would find cash flow complicated.

+1 It totally depends on your firm's structure. Ours has a complicated compensation structure that includes a deferral that hits you a few years later.

OP get an accountant who is familiar with your firm's compensation/tax structure, which can also can change. Our firm is now going to pay state taxes to get a deduction and will be taking it from individual distributions.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can someone please explain buy-in to me? DH is currently a non-equity partner and I guess could become an equity partner this year.

What does the transition from non-equity to equity partner look like? As a non-equity partner, he is considers to be self-employed and we have all of the same issues with taxes, health insurance, etc.

Wife of big law partner here. Typically when a lawyer has "made" partner, they ask that he/she buy in to the firm with a capital contribution. Sometimes $1 or $2 million dollars. Some firms ask you to take a loan to pay them up front, but most will ask that you pay $100000 or $200,000 a year out of your salary to "buy in." That money doesn't usually ever gain interest, and if one were to leave the firm they would get it back (unless firm goes bankrupt, which has happened in other firms).

The one thing you left out is that while that money doesn't gain interest, you are paying income taxes on it the year that it is taken out of your pay so you're taxed on money you won't see until you leave the firm or retire. The bright side is that when you do get the money back it's not taxable since you already paid taxes on it.

But, again it totally depends on your firm's structure. Our firm just said that in the last two years retiring partners were using nearly all of their returned contribution on deferred tax payments.

[Anonymous]

Find a financial advisor who doesn’t invest your money for you, or want to sell you insurance. We were SO happy we found Lori Atwood - she does this for us (with much, much , much less money!). Good luck, OP

[Anonymous]

Anonymous wrote:

Anonymous wrote:Can someone please explain buy-in to me? DH is currently a non-equity partner and I guess could become an equity partner this year.

What does the transition from non-equity to equity partner look like? As a non-equity partner, he is considers to be self-employed and we have all of the same issues with taxes, health insurance, etc.

Wife of big law partner here. Typically when a lawyer has "made" partner, they ask that he/she buy in to the firm with a capital contribution. Sometimes $1 or $2 million dollars. Some firms ask you to take a loan to pay them up front, but most will ask that you pay $100000 or $200,000 a year out of your salary to "buy in." That money doesn't usually ever gain interest, and if one were to leave the firm they would get it back (unless firm goes bankrupt, which has happened in other firms).

Thank you so much.

Realizing that we will have two (2!) children in college the same year DH will have to buy in. He’s at $600K as a non-equity partner. Not sure how we will make the math work. DC1 is at a school that is 80K per year (529 takes care of about 1/2 of that) and DC2 likely will be at a similarly priced school with about 1/2 of the payment in 529. So will have $200K to the law firm and $80K to the colleges. Not sure how this is going to work. Do people dip into investments for buy ins?

[Anonymous]

Keep in mind / we made way less the first year my husband was partner at a top 20 firm - medical is HUGE. It was like 4-5k less per month. We also owed a ton in federal taxes for the year before and had to pay estimated taxes that first April. It sucked. Also the firm was totally ridiculously opaque about the whole thing. I was so bitter. Oh and there is no bonus, which we had used every other year to pay federal taxes for the year before.

[Anonymous]

Anonymous wrote:Keep in mind / we made way less the first year my husband was partner at a top 20 firm - medical is HUGE. It was like 4-5k less per month. We also owed a ton in federal taxes for the year before and had to pay estimated taxes that first April. It sucked. Also the firm was totally ridiculously opaque about the whole thing. I was so bitter. Oh and there is no bonus, which we had used every other year to pay federal taxes for the year before.

I am a pp and this was us. We owed $18,000 for federal taxes somehow this year and then in April also owed our first quarterly taxes of $30,000. That was a hard pill to swallow. Thankfully we had budgeted this and saved part of his bonus and also saved from his paycheck. I work and get health insurance for our family thank god as well. I can’t imagine if you went from having subsidized health insurance to having to pay the full amount.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Keep in mind / we made way less the first year my husband was partner at a top 20 firm - medical is HUGE. It was like 4-5k less per month. We also owed a ton in federal taxes for the year before and had to pay estimated taxes that first April. It sucked. Also the firm was totally ridiculously opaque about the whole thing. I was so bitter. Oh and there is no bonus, which we had used every other year to pay federal taxes for the year before.

I am a pp and this was us. We owed $18,000 for federal taxes somehow this year and then in April also owed our first quarterly taxes of $30,000. That was a hard pill to swallow. Thankfully we had budgeted this and saved part of his bonus and also saved from his paycheck. I work and get health insurance for our family thank god as well. I can’t imagine if you went from having subsidized health insurance to having to pay the full amount.

I also work but went part time so wasn’t an option. And we didn’t have the option of saving for it because the firm failed entirely to explain what would happen and was vague when asked. So, yeah. It blew. We had just bought a house, too. We weren’t expecting partnership that year. And we had contracted to send our kid to a $$ school. It was a really rough year financially.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Keep in mind / we made way less the first year my husband was partner at a top 20 firm - medical is HUGE. It was like 4-5k less per month. We also owed a ton in federal taxes for the year before and had to pay estimated taxes that first April. It sucked. Also the firm was totally ridiculously opaque about the whole thing. I was so bitter. Oh and there is no bonus, which we had used every other year to pay federal taxes for the year before.

I am a pp and this was us. We owed $18,000 for federal taxes somehow this year and then in April also owed our first quarterly taxes of $30,000. That was a hard pill to swallow. Thankfully we had budgeted this and saved part of his bonus and also saved from his paycheck. I work and get health insurance for our family thank god as well. I can’t imagine if you went from having subsidized health insurance to having to pay the full amount.

I also work but went part time so wasn’t an option. And we didn’t have the option of saving for it because the firm failed entirely to explain what would happen and was vague when asked. So, yeah. It blew. We had just bought a house, too. We weren’t expecting partnership that year. And we had contracted to send our kid to a $$ school. It was a really rough year financially.

How many years out are you now? Was it worth it?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Keep in mind / we made way less the first year my husband was partner at a top 20 firm - medical is HUGE. It was like 4-5k less per month. We also owed a ton in federal taxes for the year before and had to pay estimated taxes that first April. It sucked. Also the firm was totally ridiculously opaque about the whole thing. I was so bitter. Oh and there is no bonus, which we had used every other year to pay federal taxes for the year before.

I am a pp and this was us. We owed $18,000 for federal taxes somehow this year and then in April also owed our first quarterly taxes of $30,000. That was a hard pill to swallow. Thankfully we had budgeted this and saved part of his bonus and also saved from his paycheck. I work and get health insurance for our family thank god as well. I can’t imagine if you went from having subsidized health insurance to having to pay the full amount.

I also work but went part time so wasn’t an option. And we didn’t have the option of saving for it because the firm failed entirely to explain what would happen and was vague when asked. So, yeah. It blew. We had just bought a house, too. We weren’t expecting partnership that year. And we had contracted to send our kid to a $$ school. It was a really rough year financially.

How many years out are you now? Was it worth it?

Ask me next year! We haven’t even got the big end of year pay out yet lol. I guess I meant it has been a really rough 8 months! Sigh. I asked my husband if he could be demoted.

[Anonymous]

This thread is so nauseating.

[Anonymous]

I haven’t read through all of the responses so apologies if I am repeating what others have already said.

First, I would suggest your husband connect with more senior partners and find out if there is a tax accounting firm that many of them turn to for their personal taxes. We have been working with an accounting firm that does work for about half of the partners at my husband’s firm, and also does a lot of work for people at my organization (which has its own tax-related issues), and it has helped a lot.

Second, wanted to say that you are not at all alone. For our part, take-home income is much lower through the first third of the year and then goes up significantly. Part of that is based on client pay cycles, part on frontloading of taxes, part on our higher retirement contributions earlier in the year, part on paying insurance early in the year, and a few other things. It makes a pretty big difference and can feel a little and grounding to have such a fluctuating income over the various seasons, and I say that as someone who has been living the cycle for many years. Also, depending on the law firm structure and your husbands compensation, it’s not unusual for partners to take home less money than they did as senior associates. In addition to changing pay structure, this is also because he may be paying off a required capital contribution, which cuts into take-home pay.

We work with Julie Schoen at Citron as an accountant and she’s terrific. Really, though, I suggest finding out if there’s a firm that represents the partners individually.

[Anonymous]

For my final estimated quarterly tax payment last year we were anticipating something like 40k-50k, based on our accountant’s projections. He popped up several days before the due date and said we should pay $250k+. Insanity. We did have a massive year and some unexpected income, but even with that it’s clear he just had us underpaying throughout the year.

Moral of the story: find a really, really good CPA who understands your firm’s approach and documents.

[Anonymous]

Anonymous wrote:For my final estimated quarterly tax payment last year we were anticipating something like 40k-50k, based on our accountant’s projections. He popped up several days before the due date and said we should pay $250k+. Insanity. We did have a massive year and some unexpected income, but even with that it’s clear he just had us underpaying throughout the year.

Moral of the story: find a really, really good CPA who understands your firm’s approach and documents.

How is that even possible? Did your paycheck change month to month? Was the bonus or monthly distribution wildly huge compared to what you thought?

My husband has a certain set paycheck each month. We just save 40% each month. And then also save 40% of any distribution he gets.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Do firms no longer retain accounting firms to handle partner’s taxes?

Nope. Most will “recommend” several. But retaining a single firm or even recommending just one is a massive liability.

It’s been awhile since I left big law but all partners in my firm, including nonequity, definitely used one of the big three firms. I guess one could opt out, but few did.

[Anonymous]

Anonymous wrote:This thread is so nauseating.

+1 poor rich people.