Fees, Client Property and Trust Accounts: every key term you need (+ practice quiz)
25 flashcard terms for Professional Responsibility Topic 6, written to match the course framework. Study them here, then drill them as interactive flashcards, or test yourself with the 15-question quiz — free, no account needed.
Model Rule 1.5(a) forbids an unreasonable fee or unreasonable expenses, judged by factors including time and labor, novelty and difficulty, the skill required, customary local charges, results obtained, time limits imposed, and the nature of the client relationship.
Fee communication requirement
The scope of the representation and the basis or rate of the fee and expenses must be communicated, preferably in writing, before or within a reasonable time after beginning work, except where the lawyer regularly represents the client on the same terms.
Contingent fee writing
A contingent fee must be in a writing signed by the client stating the method of calculation, the percentages at each stage, expenses to be deducted, and whether expenses come off before or after the contingency is computed.
Contingent fee closing statement
At the end of a contingent matter the lawyer must give the client a written statement showing the outcome and, if there is a recovery, how it was determined and the remittance to the client.
Prohibited contingent fees
Model Rule 1.5(d) bars a contingent fee in a domestic relations matter that is contingent on securing a divorce or on the amount of alimony, support, or property settlement, and bars any contingent fee for defending a criminal case.
Fee splitting between firms
Lawyers not in the same firm may divide a fee only if the division is proportional to services performed or each assumes joint responsibility, the client agrees in a writing including the share each will receive, and the total fee is reasonable.
Referral fee limits
A pure referral payment untied to services or joint responsibility violates Model Rule 1.5(e), and Model Rule 7.2 separately bars giving anything of value for a recommendation apart from limited exceptions.
Retainer terminology
A true retainer paid to secure availability is earned on receipt and may go in the operating account, whereas an advance payment for future services remains client money and belongs in trust until earned.
Nonrefundable fee problem
Labeling a fee nonrefundable does not make it so, because Model Rule 1.16(d) requires refunding any unearned portion when the representation ends, whatever the engagement letter says.
Flat fee handling
A flat fee may be collected in advance, but many jurisdictions require it be held in trust until earned by milestones, and the client must always retain the right to a refund of the unearned part.
Safekeeping property
Model Rule 1.15 requires holding client and third-party property separate from the lawyer's own, with funds in a separate trust account in the state where the office is located, and complete records kept for five years after the representation ends.
Commingling
Depositing client funds into the lawyer's operating account, or leaving earned fees indefinitely in trust, is commingling and is a disciplinary violation regardless of whether any client loses money.
Misappropriation
Using client trust money for the lawyer's own purposes, even briefly and even with full repayment, is among the most serious violations and commonly results in disbarment.
Bank charges exception
A lawyer may deposit her own funds in a client trust account only in the amount necessary to pay bank service charges, and only that purpose justifies the deposit.
Prompt notice and delivery
When a lawyer receives funds or property in which a client or third person has an interest, she must promptly notify them, promptly deliver what they are entitled to receive, and render a full accounting on request.
Disputed funds
If the lawyer and client or a third party dispute ownership of trust money, the disputed portion must stay in trust until the dispute is resolved, while the undisputed portion is distributed promptly.
Third-party liens on settlement funds
A lawyer must honor a valid medical lien or statutory claim against settlement proceeds and may not disburse the disputed amount to the client, though the lawyer need not arbitrate frivolous third-party claims.
IOLTA accounts
Nominal or short-term client funds go into a pooled interest-bearing account whose interest funds legal services for the poor, while larger or longer-held sums should be placed in a separate account earning interest for that client.
Trust account recordkeeping
A lawyer must maintain a ledger for each client, reconcile the trust account regularly against bank statements, and never write a check against uncollected deposits that would invade another client's funds.
Fee disputes and arbitration
A lawyer should consider participating in an established fee arbitration program and must do so where a jurisdiction makes it mandatory, rather than retaliating with unnecessary litigation against a former client.
Retaining lien
Some jurisdictions permit a lawyer to hold a client's papers pending payment, but Model Rule 1.16(d) requires surrendering materials the client is entitled to and a lien may never be used where it would prejudice the client.
Expenses and disbursements
Charges for copying, research databases, and staff time must reflect actual cost or a reasonable disclosed rate; marking up disbursements as hidden profit violates the reasonableness requirement of Model Rule 1.5(a).
Billing integrity
Double billing two clients for the same hour, billing for time not worked, or padding tasks constitutes dishonesty under Model Rule 8.4(c) as well as an unreasonable fee.
Fees in court-appointed and pro bono work
Model Rule 6.1 sets an aspirational goal of fifty hours of pro bono service a year, and Model Rule 6.2 says a lawyer should not avoid a court appointment except for good cause such as unreasonable burden or a conflict.
Modifying a fee agreement mid-representation
Changing a fee arrangement after work begins is scrutinized like a business transaction with a client, requiring fairness, full disclosure, and often written consent because the client's bargaining power is reduced.