Unit 7

Fees and Fee Sharing

Attorney’s FeesAttorney's fee is a chiefly United States

term for compensation for legal services performed by an attorney (lawyer or law firm) for a client, in or out of court. It may be an hourly, flat-rate or contingent fee. Attorney fees are separate from fines, compensatory and punitive damages, and (except in Nevada) from court costs in a legal case. Surveys suggest that fees range from $150 to $1000 per hour when billed hourly.

Hourly RateThe range of fees charged by lawyers varies

widely from one city to the next. Most large law firms in the United States bill between $200 and $1,000 per hour for their lawyers' time, though fees charged by smaller firms are much lower. The rate varies tremendously by location as well as the specific area of law practiced. Typically insurance defense firms have lower hourly rates than non-insurance firms, but are compensated by having steady, regular paying work provided. Locations like Salt Lake City[clarification needed] will average $150 per hour for an associate's time on a basic case, but will increase for larger firms.

Contingent FeeA contingent fee (in the United States) is

any fee for services provided where the fee is only payable if there is a favorable result.

Fixed FeeAttorneys charge a fixed fee for standard

routine matters such as wills, deeds, the search of a real estate title, representing you in a simple bankruptcy, drafting a basic contract, traffic offenses, or minor criminal matters. These are some but not all of the examples of tasks for which an attorney may charge you a fixed fee.

Questions to consider regarding reasonableness of feesMost Attorneys Don't Charge a Fee for the

Initial MeetingWhile most estate planning attorneys still won't

charge a fee for the initial meeting, recently I've noticed this changing. With the state of the economy, you shouldn't be surprised if the attorney does charge a small fee for the initial meeting with you. Keep in mind that the estate planning attorney is also a business man or woman, and so time spent with you takes time away from billable time on other client matters. Your time is valuable, but so is theirs.

Estate Planning Attorneys Charge a Flat Fee for Estate Plans

What does a flat mean for estate planning matters? One dollar amount covers the initial meeting, preparation of basic documents, review of documents, and signing of the documents. Some attorneys will also include assistance with funding your trust as part of their flat fee, while others will charge a separate funding fee based upon what they'll be helping you fund into your trust. The alternative would be for the attorney to charge on an hourly basis, but many people are uncomfortable with this approach since there's a great deal of uncertainty about what the final cost will be. You can avoid this by requiring that your estate planning attorney come up with a flat fee to cover all of the services that they'll be providing to you.

Ask About Standard Hourly Rates

Even if the attorney quotes you a flat fee, they'll still have a standard hourly rate for other services. Ask the hourly rate of the attorney you're meeting with as well as for other attorneys and paralegals in the same firm. (Note: Usually the higher the attorney's hourly rate, the more experience the attorney has.) This will give you an idea of how many hours the attorney expects the firm to spend on your estate plan. And keep in mind that while the hours may seem like a lot to you, if the attorney is really experienced then they'll have a good idea about the time it will take to meet with you and answer your questions, design and draft your plan, review your plan with you, help you sign your plan, and then help you fund your trust.

Don't Ask for a Range of Fees!

This is by far the worst question to ask: "Can you give me a range of fees that you charge for estate planning documents?" If the attorney does give a range of fees, then inevitably you'll be setting yourself up for disappointment because all you'll be focused on is the lowest fee quoted. This won't allow you to think clearly about the value you'll be getting for your money and if the attorney does ask for more than the minimum fee, then you just won't be happy. It's better to discuss your estate planning needs with the attorney first before any fees are quoted because then the attorney will be able to establish a reasonable fee based upon their overall experience with handling estate planning needs similar to yours.

Meet with Two Attorneys by Telephone First

It's common these days to handle a significant amount of business by telephone. Instead of meeting in person, for your initial meetings consider setting up telephone interviews with at least two estate planning attorneys. This will not only save you and the attorneys time, but you'll be able to tell within the 30 minutes set aside for the call whether you want to work with the attorney or not. The attorney will also be able to get a feel for what your needs are and quote you a flat fee for your basic estate plan. This will then give you the opportunity to compare the flat fees quoted by each attorney and narrow down your choice as to who you want to meet with in person.

Don't Settle for Less!

You know the old saying, "You get what you pay for"? Don't necessarily settle for the cheapest attorney. First, ask the attorney who's going to charge you more why. While some attorneys are in the business of selling estate plans in bulk, others are truly interested in giving you a high quality estate plan and becoming your advisor for life with regard to your estate plan as well as other legal needs. Second, think about how comfortable you felt with the attorney since you'll need to be open and honest when discussing the most intimate details of your personal life and finances. Last, go with your instincts because only you'll know for sure who you'll be able to trust with this important part of your life.

How to explain legal fees to clients1. Explain that a retainer fee is money payable

by the client at the beginning of engaging the attorney's services. Generally, the attorney's hourly rate is deducted from the retainer fee and a statement is provided to the client on a periodic basis accounting for the retainer. Some retainer fees, however, are engagement fees with hourly attorney billing occurring afterward.

Continued….2. Tell a client that a fixed fee is just as it

would suggest: a one-time payment for legal services on a matter. Clarification should be made as to whether a flat fee includes the costs of legal expenses associated with the legal services rendered. This type of fee is usually provided for drafting wills or simple real estate transactions.

Continued3. Demystify the billable hours fee model by

first disclosing the attorney hourly rate. The billable hours fee structure is when an attorney calculates a client bill on a periodic basis, usually monthly, by multiplying his hourly rate times the amount of time spent on the client's matter during the applicable billing period. The legal profession has reported an increasing concern with the billable hours model.

Continued…4. Make clear that the contingent fee is

based on the attorney being paid only if the attorney obtains a monetary recovery for the client. This is the typical fee model in personal injury cases, and usually involves the attorney receiving a percentage of the client's recovery, such as third, less expenses.

Continued…5. Make sure that attorney fees are included in

the attorney-client contract regardless of the type of fee structure used. This is especially important when a combination of potential attorney fee models are used, or modified contingency fees apply, as these are more apt to create disagreements as to the original intent and understanding of the attorney and client at the time of the fee agreement.

Advance vs. RetainerAn advance payment is generally a

payment required in advance of legal services being performed.  When services are performed, the advance payment is applied against the invoice balance.  A retainer can be a fixed payment for a certain consistent volume of services, or it is sometimes traditionally described as paying a certain amount per month for an unlimited volume of services. 

Where is the Client’s $ to be Kept?IOLTA Accounts: A lawyer who receives

funds that belong to a client must place those funds in a trust account separate from the lawyer's own money.

Where does the interest go?Interest on Lawyers Trust Accounts (IOLTA)

is a unique and innovative way to increase access to justice for individuals and families living in poverty and to improve our justice system. Without taxing the public, and at no cost to lawyers or their clients, interest from lawyer trust accounts is pooled to provide civil legal aid to the poor and support improvements to the justice system.

3 Common Lawyer Trust Account Mistakes1. "Borrowing" money from the trust

account.2. Commingling attorney funds with

client money.3. Failing to properly track client funds.

Establishing legal feesA paralegal must never agree to charge a client a

specific fee.Obviously, this is a matter of great importance to the

client. Many clients will press the paralegal for information — “How much is this going to cost?” “What do you usually charge?” In each case, the paralegal should refer the client to the lawyer for this information.

Again, it does not matter if the paralegal is experienced or competent. The specific fees charged for legal matters can vary greatly depending on the complexity of the matter, the length of time it takes to address the client's problem, and whether there are unforeseen difficulties. The attorney has an ethical obligation to discuss all fee matters with the client prior to undertaking representation. The paralegal cannot perform this essential duty for the lawyer.

Any questions?? That’s it for me.If there are no questions, have a restful

evening!