What is a Retainer and How is it Used?
Posted By Irene C. Olszewski, Esq. on November 23, 2010
During lunch with a few colleagues last week, the subject of retainers came up. Sometimes, we agreed, clients are confused about exactly what a retainer is and how it is used. I thought I’d take a moment to explain the retainer system as it applies to law firms.
A retainer is a sum of money you give to your lawyer as an advance for legal services that the lawyer has agreed to perform for you (and sometimes for expenses associated with your legal matter). A lawyer must deposit your retainer monies into a special bank account known as a clients funds account, which must be a separate account from the lawyer’s business operating account. It is strictly impermissible for a lawyer to co-mingle his or her business or personal funds with the client retainer funds.
Lawyers are required to keep accurate and detailed records of all funds deposited into and withdrawn from the clients funds account. The clients funds accounts of all Connecticut lawyers are subject to random audit. Any interest earned on the clients funds account is electronically sent to the state’s IOLTA (Interest on Lawyers Trust Accounts) program to fund legal services programs for the indigent and to award scholarships and grants. In Connecticut, the IOLTA program is administered by the Connecticut Bar Foundation.
Most lawyers bill against your retainer on a monthly basis. For example, if you gave your lawyer a $2,000 retainer and he or she performed 2 hours of legal work on your behalf during the month of November (at a rate of $250 per hour), the lawyer would withdraw $500 from your retainer in the clients funds account as earned income. That would leave a balance of $1,500 in your clients funds account which is still considered unearned by the lawyer. In other words, it is still your money but it is held in trust until it is earned by the attorney.
At the conclusion of your legal matter, an attorney will return to you any monies remaining in your clients funds account that was unearned by the law firm. Or, if your retainer has been exhausted, you will be obligated to pay the remaining balance for legal fees after your retainer balance has been applied to the final invoice.
Sometimes clients believe that the money they pay to an attorney as a retainer is a set total fee for the legal services. Unless your lawyer specifically tells you that he or she is charging you a flat fee for legal services, such as the drafting of a Power of Attorney or Last Will and Testament, a retainer is payable as an advance only. The actual cost of the legal services might be less (in which case money will be returned to you) — but it might also be more. For example, in the case of a divorce, which requires ongoing legal work, it isn’t always possible for your lawyer to accurately determine in advance what the cost of legal services will be. Unfortunately, there are too many variables in a divorce that can effect the final cost of representation. For that reason, you are required to pay a retainer (advance) and may be asked to replenish it while your case is pending, if it falls below a certain dollar amount.
I hope this has cleared up some of the confusion you may have had about retainers and how they are used.
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Disclaimer: The information, comments and links posted on the blog do not constitute legal advice. I will not respond to any specific legal questions in the comments section of this blog. Read my entire disclaimer.
copyright 2010 Irene C. Olszewski
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