September 23, 2019 | All Finance Topics, Trust Accounting

Fees and When to Place in Trust

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Types of Fees

Retainer. A retainer is a sum of money paid to a lawyer to guarantee the lawyer’s future availability. A retainer is not payment for past legal services and is not payment for future services.

Flat Fee. A flat fee is a sum of money paid to a lawyer for all legal services to be provided in the representation. A flat fee may be termed “non-refundable.”

Advance Fee. An advanced fee is a sum of money paid to the lawyer against which the lawyer will bill the client as legal services are provided.

When Are Fees Held in Trust?

Rule 5-1.1 (a) states that “funds and property of clients or third persons that are in a lawyer’s possession in connection with a representation,” must be held in the attorney’s trust account. Florida Ethics Opinion 93-2 further explains that “[e]arned fees, including ‘true retainers,’ must not be placed in the trust account. Unearned fees and advances for costs must be placed in the trust account.”

An advance fee is unearned, it is the property of the client, and therefore MUST be held in the attorney’s trust account until it is earned or the cost is incurred.

A nonrefundable retainer or nonrefundable flat fee is earned, it is the property of the lawyer, and therefore SHOULD NOT be held in the attorney’s trust account.

If a client gives the lawyer a negotiable instrument that represents both an advance on costs plus either a nonrefundable retainer or a nonrefundable flat fee, the entire amount should be deposited into the lawyer’s trust account, then the portion representing the earned nonrefundable retainer or nonrefundable flat fee should be withdrawn within a reasonable time.

Nonrefundable Fees

Rule 4-1.5 (e) requires that a nonrefundable fee be CONFIRMED IN WRITING, explaining the nature and the amount of the nonrefundable fee.

Rule 4-1.5(e) does not require the client to sign a written document memorializing the terms of the fee. A letter from the lawyer to the client setting forth the basis or rate of the fee and the intent of the parties in regard to the nonrefundable nature of the fee is sufficient to meet the requirements of this rule.

Illegal, Prohibited, or Clearly Excessive Fees and Costs

ALL FEES, including nonrefundable fees, are subject to the prohibition against excessive fees. See Rule 4-1.5 (a).

Florida Ethics Opinion 93-2 cautions that even though a nonrefundable fee is earned upon receipt and deposited in an attorney’s operating account:

“[T]he lawyer may later be obligated to refund part, or possibly all of it, if the legal services are not performed, in which case the fee may be found to be excessive, but the money is the lawyer’s upon receipt of it.”