Legal Retainers: The Good, The Bad and The Ugly
Paying a Lawyer
There are about as many variations on legal retainers as there are attorneys. Kathryn Wayne-Spindler has seen them all in her 21 years of law practice with many different firms. After experiencing the upsides and downsides of many law payment structures, she has arrived at what she believes is the most efficient and cost-effective retainer system – the Refundable Retainer.
Refundable Legal Retainers
In this system, the lawyer confers with the client to explain the action required in the case and the predicted cost. Then the client transfers an upfront sum – either the predicted total or the predicted amount to cover 2-4 months worth of work on the case. The attorney reserves this retainer in an account. Every month, the attorney sends the client an invoice explaining how the money is being spent. At the end of the case, if there is money remaining, that amount is refunded to the client. In the instance where the case grows beyond the original estimate, the attorney and client will agree on a further amount.
Wayne-Spindler says she chose this payment system for her practice because it is the best of all worlds for her clients and herself. “I think people should be aware of exactly how their attorney is spending the money,” said Wayne-Spindler of the Refundable Retainer system.
There are other options, but Wayne-Spindler has seen disastrous results with retainer systems used at other firms.
Close and Bill Legal Retainers
In the “Close and Bill” situation, the client pays a little bit up front. After the case is complete, the attorney bills for the full remaining amount. After billing, the client has 30 days to pay. This is a hardship on some clients who may have trouble coming up with thousands of dollars in a short time. It can also be collections-intensive for the law firm if clients fail to pay in the allotted time-period.
Non-Refundable Legal Retainers
Attorneys who employ a non-refundable retainer system, charge an up-front fee – perhaps $3,000 or more – and keep that amount whether the case costs that much or not. Attorney Jeffery Worosz said, “think of it as a signing bonus.” He explained, “attorneys say, ‘because I agreed to take your case, I can’t take on other cases.’” In addition, the attorney charges a “regular” retainer.
Flat-fee Legal Retainers
Of all the payment systems, the flat fee is a recipe for disaster, especially in divorce. After hearing the basics of the case during an intake interview, an attorney determines a flat fee based on an average of other similar cases. Although it may seem like a deal at the outset, it’s almost always a lose-lose for the client.
On one side, if the case is on the easier side of the average, the client ends up paying more than needed. “If all goes well with the case, you’re overpaying,” said Worosz.
“The other side is what happens when your case explodes,” explained Worosz. Sometimes cases become more involved than originally anticipated. Possibly the client withheld important information; the opposition stacked up unnecessary legal action; or the attorney mis-estimated the action required. Whatever the reason, when the flat fee runs out, the attorney gets frustrated to be working without being paid so often the case becomes a lower priority. This can result in the client becoming dissatisfied with the level of attention that his or her case is receiving. This is especially disheartening in a divorce case when the client is dependent on a lawyer to guide him or her through an emotionally and legally-intensive period of life.
“This is a time when you want your lawyer to be responsive to your needs,” said Wayne-Spindler. “You may already feel abandoned by your spouse and then your attorney neglects you too. It’s a bad situation all around.”
After years of experience with variations on all of these payment methods, Wayne-Spindler settled on the Refundable Retainer method. “I’ve worked in law firms that do all of these things, that’s why when I set up my own practice I chose to do things the way I have.”
Contact Kathryn Wayne-Spindler & Associates for all of your family law, divorce, adoption and estate planning cases at 248-676-1000. The experienced Michigan attorneys handle cases throughout Southeastern Michigan including Oakland, Wayne, Washtenaw, Livingston, and Genesee counties. We help clients in Milford, Michigan; Highland; Hartland; Commerce; White Lake; Walled Lake; Waterford; West Bloomfield; Howell; South Lyon; New Husdon; Linden; Grand Blanc; Holly and many more local communities.
Written and Posted by Christine Donlon Long, Communications’ Specialist for Kathryn Wayne-Spindler & Associates