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What's the Purpose of a Lawyer Retainer? - Werner Law Firm

What's the Purpose of a Lawyer Retainer?

Troy Werner and his family

Written by Troy Werner

Troy Werner has been an indispensable asset to The Werner Law Firm since joining in 2009, providing exceptional legal service to its clients.

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POSTED ON: August 8, 2022

It comes as no surprise to anyone that legal work is hard work – and in many cases, expensive work. The average person does not seek the advice or help of an attorney lightly and wants to be sure that their hard-earned money will be well-spent. As such, a considerable portion of the initial negotiations […]

It comes as no surprise to anyone that legal work is hard work – and in many cases, expensive work. The average person does not seek the advice or help of an attorney lightly and wants to be sure that their hard-earned money will be well-spent. As such, a considerable portion of the initial negotiations between a client and their prospective legal counsel will revolve around methods and schedules of payment and the necessity (and current estimation) of every relevant price point the case may entail. To that end, most legal professionals will begin asking for initial payment as a lawyer retainer fee.

What Is a Lawyer Retainer Fee?

A lawyer retainer fee is not a payment per se. Instead, it is a negotiated sum of money that a lawyer holds in trust for their client via a particular attorney's trust account, which functions as an escrow. This means that a third party, the trust account, will hold the money for the client to be used by the lawyer once they have earned it. A lawyer is not automatically entitled to the money a client pays as a retainer fee.

Instead, that money becomes a pool of funds for lawyers to draw upon only once they have proof of necessary payment, such as bills and receipts. Suppose you pay $25,000 into a retainer fee. In that case, your lawyer may only use that money to pay for incurred costs (such as the administrative costs of requesting documents needed for your case) or to pay for their billed hours after completing the prerequisite work.

Lawyer retainer fees are never indicative of any given case's final costs and may represent any percentage of what a client will end up paying in total. Early negotiations can help provide an opportunity for clients to get a better total estimate of what they should expect to pay for the entire ordeal. In most cases, a client's retainer fee will need to be replenished at some point during the case, if a lawyer either:

  1. Fully depletes the retainer fee through assorted costs and hours billed, or;
  2. The retainer fee has dipped below a particular value per the retainer fee agreement you signed, and you must replenish the funds to satisfy that minimum value.

Retainer fees act as a protection and reassurance for the client and the attorney. For the client, a retainer fee essentially guarantees you the services of an attorney. Your attorney is bound to your case for as long as both of you continue to act within the bounds of your contract. For attorneys, retainer fees help ensure that a client's funds are enough to pay for the costs associated with the case, from the hours spent to the money needed to:

  • File paperwork
  • Collect documents
  • Make information requests
  • Pay for travel costs
  • And so on

If your retainer fee ultimately outstrips the actual costs accrued by your chosen lawyer or law firm, you become entitled to a refund, so long as your retainer agreement does not involve a flat fee. For example, if you paid a flat fee of $35,000 to resolve your case, but your attorney manages to complete the task for a lower total cost, they are still entitled to the fully negotiated fee.

On the other hand, if the lawyer retainer fee acted as a down payment for their hourly rate plus associated costs, and they resolved your case in about half the estimated time, the remainder of your retainer fee is returned to you.

Why Do Some Lawyers Insist on a Retainer?

A legal retainer is an insurance. While a retainer is no guarantee of your financial abilities to pay for the entirety of the oncoming legal fees, a retainer fee at least ensures that your attorney receives some compensation for the time spent working on your case. Not all cases will require a retainer fee. Your lawyer may be happy to perform their legal services for an upfront flat fee if it is something simple enough.

There are also cases lawyers will work for free. For example, suppose you need a lawyer to draft and notarize a series of estate planning documents and perform no other services. In that case, they may bill you a flat fee based on the estimated time spent drafting and notarizing those documents and the costs of the public notary.

However, suppose you need to avail the services of a tax attorney to represent you and defend your case against the IRS. In that case, it may be more challenging to pinpoint the estimated time spent on your case and the assorted legal costs ahead. A retainer gives both you and your lawyer peace of mind.

When Is a Lawyer Retainer Fee Earned?

A retainer consists of unearned monies and earned monies. A retainer agreement can further specify how these are defined. Still, in general, unearned monies in a retainer are any funds left in the trust account that your attorney has not needed to access. In contrast, earned monies are any funds the attorney has pulled out of the account to pay for their billed hours or other costs associated with the case (as per properly documented receipts).

When Is a Lawyer Retainer Fee Replenished?

Retainer fees are either replenished when the total sum of unearned monies has reached zero or when your unearned retainer fee has hit a minimum point as agreed upon in your retainer agreement.

What Is a Retainer Agreement?

A retainer agreement is a legal contract between a client and an attorney, clarifying the agreement's terms, the attorney's expected legal duties, the associated costs, the structure of the fees included in the case, and more. In general, a retainer agreement will contain the following information:

  • The duties of your attorney.
  • What your attorney charges.
  • Other anticipated associated costs.
  • The itemization of your bill.
  • The terms of your retainer.

What Are Common Attorney Fees?

A retainer fee is separate from the way your attorney receives their compensation. For example, the retainer represents the money paid into an attorney's trust account before billing that accounts with their hourly rate. In this case, the attorney's compensation is calculated hourly. Attorneys may charge you differently depending on the circumstances of your case. Personal injury claims, for example, are often billed through compensatory fees rather than an hourly rate.

  • Hourly Fees. The per-hour rate each attorney and paralegal will charge in your case.
  • Flat Fees. Flat fees are associated with services with a precise estimated time cost.
  • Compensation Fees. Fees are expressed as a percentage of the money awarded in a litigation case, i.e., as part of the compensatory fee awarded to a plaintiff in a personal injury case or the money received in a legal settlement.
  • Engagement Fees. In certain circumstances, lawyers may charge additional engagement fees when cases require considerable time and resources, sacrificing a firm's ability to take on other cases and clients.

The terms of legal compensation will usually depend on the case's specifics and a client's needs. The simpler the requirements, the simpler the payment. Before you sign anything, it pays to thoroughly discuss compensation with your would-be attorney and assuage any fears or answer any questions you might have regarding the financial impact of your case.

Most firms and individual lawyers will be upfront about what to expect. They want to get paid – and they will want to make sure you have the financial means to seek their services.

What's the Purpose of a Lawyer Retainer? - Werner Law Firm

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