The right way to get paid in advance

By David Baugher Dolan Media Newswires ST. LOUIS, MO--One big weapon in the fight to get paid: Cash upfront. But how much should you accept? What are the legalities involved? How is a trust account used? What is the difference between a retainer and an advanced fee? Here are some tips: 1) Understand the terminology. Some lawyers remain confused over the meaning of "retainer." It's often used colloquially to refer to an advanced payment to be drawn against for services, a flat fee to cover all legal work over a period of time or a fee to reserve a lawyer's availability against potential conflicts. Chris Stiegemeyer, director of risk management at The Bar Plan Mutual Insurance Co., says that according to the Missouri Supreme Court, only the last is a true retainer. "They discouraged use of the word 'retainer' when lawyers mean money that is going to be held in trust and billed against," he says. "The word 'retainer' has a specific legal meaning, and to call an advanced fee a retainer doesn't really fit." 2) Get it ahead of time. Lori Levine, a family law and professional licensing attorney with Carson & Coil in Jefferson City, says lawyers shouldn't be shy about seeking cash upfront. Sometimes lawyers who are eager for business are reluctant to discuss dollars and cents, she says. "The advance fee, as we now call it, should be set based on a minimum amount for which you could resolve the entire suit," she says. 3) Balance it out. Not everyone agrees that an attorney should ask for everything upfront. Ed Poll, of Venice, Calif.-based LawBiz Management, says requesting too much too soon can discourage a client. An advanced payment is just a show of good faith -- nothing more. "You are faced with competing dynamics here," he says. "The more money you ask for upfront without the client seeing the value of your work or you putting forth any effort, the less likely the client is going to be able to afford you on the one hand or even want you on the other hand." 4) Disputes mean stop withdrawing. Regardless of how much you accept, both Stiegemeyer and Poll say money cannot be withdrawn from the client's trust account in the event of a fee dispute. "Large retainers are great, but they are not all that significant because, even if you have money in a client trust account, should there be a fee dispute with the client, all they have to do is say, 'Don't pay out of the client trust account,'" Poll says. "That money's frozen. You can't touch that." 5) Spell out the details. A good engagement letter or agreement can clear up a lot of minutiae and prevent disputes from arising over the use of money in a trust account. Experts, depositions and unusual copy fees for records that may run hundreds of pages can quickly increase the cost of a case, Levine says. Does that money come from the trust account? "You should be clear on what's coming out of there and what you are going to be telling the client, 'Look, you owe for this.'" 6) An advance isn't everything. Getting a good sense of your client's financial situation can be as valuable as a big advance, Poll says. If the client seems less reliable, ask for more cash now. "Understand who your client is. Make sure they have good credit history. Make sure they have the ability to pay your bill," he says. 7) Set benchmarks on flat fees. Changes to state rules regarding upfront flat fees mean such fees cannot be accessed until after the specific task is completed, Stiegemeyer says. It's imperative for lawyers who want to access money earlier to set benchmarks during the course of the matter; that allows the withdrawal of certain parts of the fee. "This all has to be agreed to upfront," Stiegemeyer says. "The lawyer can't just get halfway through the representation and then say, 'I'm going to take some of the flat fee out now,'" he says. "Before the lawyer receives the flat fee, there has to be an agreement with the client establishing these benchmarks." 8) Smooth out bills. Averaging bills over time can save clients from sticker shock, Stiegemeyer says. Trust accounts can play a role for this purpose. "If there is an overage, it goes into the trust account," he says. "If it is already an earned fee by the time the money comes in, it goes into the operating account. If the lawyer treats it properly under the rules, the fact that there is a set amount of money over or under the amount billed each month is not a problem in and of itself." 9) Do your homework. The Bar Plan will present more than 20 CLEs this spring on advance fees and related issues, Stiegemeyer says. The state Supreme Court also has issued guidance on the topic. "Lawyers really need to be encouraged to peruse Formal Opinion 128 to understand what the proper applications of that fee are," he says. Entire contents copyrighted © 2011 by Dolan Media Company. Published: Mon, Apr 25, 2011