Lawyer Retainers: Definition, Purpose, and Ethics

Lawyer retainers are fees paid upfront by the client to secure the services of an attorney. They reserve the time and expertise of a lawyer, making them accessible to the client for an agreed-upon time. They also provide peace of mind that the client has dedicated legal representation when they need it.

In this article, we’ll explore what a lawyer retainer is, how it works, and why attorneys should use it at their firm. We’ll also share best practices for implementing retainers to ensure a smooth process and increased client satisfaction.

Aspects of a Lawyer Retainer

Clients can get confused about how legal retainers work since many law firms use the term “retainer” differently. Some use it to refer to advanced payments, while others describe the initial payment to begin work.

Retainers can also vary greatly depending on the:

• Specific circumstances of a case
• Attorney’s fee structure
• Requirements of the local jurisdiction
• Final agreement between the client and the lawyer

To understand the appropriate use of retainers in the legal field, let’s review commonly used terms and aspects of a legal retainer.

Entry Fee

Entry fees are typically a flat fee that a client pays to guarantee that the firm will handle their legal needs. However, they do not cover the actual cost of the legal services.

This fee is typically nonrefundable to the client. It should also not be deposited into a trust account because, upon receipt, it is the law firm’s money.

Unfortunately, some large firms equate a retainer to an entry fee, causing confusion for clients.

Advance Retainer Payment

Advanced retainer payments are prepayments for a retainer. We recommend using this term to clearly communicate how you’ll apply the payment.

We also recommend verifying the working definition of retainer within your home jurisdiction to understand how it applies to your firm.

The American Bar Association (ABA)’s stance on advanced payments is to:

• Avoid collecting an unreasonable fee or an unreasonable amount for the fee
• Always return unearned funds to clients
• Always deposit clients’ funds into trust accounts separate from other funds

The ABA also says that retainers are not truly nonrefundable (even if it’s labeled as such) since lawyers should return unearned funds to clients.

Lawyer Retainer Agreement

A lawyer retainer agreement outlines the terms and conditions of the working relationship between a client and a lawyer. It ensures that both parties clearly understand their expectations and responsibilities.

Unlike the lawyer retainer, which is simply the fee to retain the attorney’s availability in advance, the agreement includes all the details of the work to be performed.

Components of a Lawyer Retainer Agreement

Lawyer retainer agreements vary based on the nature of each case. Below are fundamental items to include in your agreement.

• Services to be provided
• Duration of the contract
• Attorney per-hour rate
• Billable costs to the client
• Payment schedule

While the above list is an example, legal retainer agreements are most effective when tailored to the client and the case.

How a Lawyer Retainer Works

When a client pays a retainer fee, the lawyer agrees to take on the client’s case and provide legal services during the agreed-upon period. The lawyer deposits this fee into a trust account, and it remains there until the lawyer earns it. If there are still available retainer funds after the work has been completed, the lawyer returns the remaining balance to the client.

Below is a simple example of how a retainer works:

1. The client pays the lawyer $1,000 for the retainer fee in exchange for providing legal services.
2. The lawyer accepts the funds and deposits them into a trust account.
3. The lawyer completes $750 of legal work and sends the client an invoice for approval.
4. The client reviews and approves the invoice.
5. The lawyer withdraws $750 from the trust account for payment and transfers it to an operating account.
6. The lawyer completes the work and returns the remaining $250 to the client.

Refilling the Retainer Balance

Retainer balances will naturally decline as they’re used to pay for legal services. Attorneys can navigate a diminishing retainer balance in one of two ways:

Once the balance hits zero, the attorney may switch to billing hourly or request another deposit.

• Option 1: Once the balance hits zero, the attorney may switch to billing hourly or request another deposit.
• Option 2: Include an evergreen retainer clause within the original fee agreement to avoid reaching a zero-balance account.

Best Practices for Lawyer Retainers

Attorney retainers can be a powerful tool for managing the cost of legal services. We’ll go over the three most impactful ways to use retainers to improve client experience and increase referral opportunities.

Communicate With the Client

Setting clear expectations will ensure that the client fully understands the agreement and has the confidence to move forward with your legal services.

Lawyers should discuss the retainer in detail with their client to explain:

• How it works
• How much it costs
• What it covers
• When fees are replenished
• Any other unique terms

These terms should be reflected in each invoice. Additionally, sending clear and timely invoices keeps clients in the loop and creates a seamless billing experience with your law firm.

Set Different Pricing Tiers

Pricing tiers offer clients flexibility. For example, you can offer a basic retainer that covers a set number of billable hours or a more comprehensive retainer that covers all services provided.

Clarify Your Payment Options

It’s also important to clarify how you prefer to be paid, whether by check, credit card, or digital methods. This will help to ensure that payment is processed smoothly and that the retainer is replenished as needed.

Improve Your Law Firm’s Retainer Management With LawPay

To streamline the retainer process and prevent trust account violations, legal billing software can ensure your law firm maximizes retainer agreements while upholding IOLTA compliance. At LawPay, we’re built to do just that. Schedule a demo today.