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Three options for attorney compensation

By Chesley Payne

The most commonly asked question by a client to an attorney is “What do you charge?”

Attorneys have different ways and means by which they are compensated for their work. Sometimes this means the client will pay them directly; other times it means the attorney will be paid indirectly. The first, and most familiar form of attorney compensation, is the contingent fee agreement.

Under contingent fee agreements, the attorney is not paid unless the attorney recovers a sum of money on behalf of a client. This payment arrangement is most often seen in the context of a personal injury case, like a car accident. In these instances, the attorney and client understand there is often a third party, usually an insurance company, from whom payment can be recovered. In these types of arrangements, if the attorney is unsuccessful in collecting funds, the client owes the attorney nothing. Attorneys are generally not allowed to enter into these types of payment arrangements in some types of cases, such as collection of child support or a divorce.

The second type of attorney compensation is the hourly fee agreement. In this arrangement, the attorney charges the client directly for those services provided to the client at an agreed upon hourly rate. The attorney should send monthly statements showing what has been charged over the previous month and what work has been performed. Often a client will be asked to pay a retainer up front, an amount of money deposited in the attorney’s client trust account. As the money is earned by the attorney, the attorney will deduct sums from the retainer and apply it toward the client’s bill. In the event a case is completed prior to all funds being earned by the attorney, any unearned funds are returned to the client.

A flat fee agreement is a type in which the client and attorney determine a fee to be paid in advance for all work performed on a particular matter. No matter what amount of time it takes the attorney to complete the task, all sums paid by the client are deemed to be earned upon receipt of the funds. However, the attorney is still required to hold the funds in the attorney’s trust account until the funds are earned through the efforts of the attorney.

The most important rule concerning any attorney’s fee is to thoroughly review your situation with your attorney in advance so you understand every aspect of the fees your attorney will charge during your attorney’s representation of you.

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