Do you ever collect fees in advance for work to be performed in the future?
Do you tell your clients these funds are nonrefundable?
What do you call this payment – a retainer, an advance, a paid-in-full fee?
Where do you deposit these funds?
For guidance on these and related ethical issues, you should first turn to your state bar or licensing and disciplinary authority to find out what rules apply in your jurisdiction.
Recent guidance is provided by ABA Formal Ethics Opinion 505, issued in June 2023.
“Under the Model Rules of Professional Conduct, a fee paid to a lawyer in advance for services to be rendered in the future must be placed in a client trust account and may be withdrawn only as earned by the performance of the contemplated services,” according to the opinion. “This protects client funds and promotes client access to legal services in the event the representation terminates before all contemplated services have been rendered. All fees must be reasonable, and unearned fees must be returned to the client. Therefore, it is not accurate to label a fee ‘nonrefundable’ before it actually has been earned, and labels do not dictate whether a fee has been earned.”
Click here to read the full text of ABA Opinion 505.
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