Hi all! Can you believe that August is already over, and Labor Day is upon us? 2022 is absolutely flying by. Today I wanted to highlight an important difference that can often be confusing for clients in the legal world – deposits and retainer fees.
The words deposit and retainer fees are often used interchangeably. However, in the legal world, they can have very different meanings. It is important to know which type of legal fee you are paying so you have a clear understanding of the cost of your case and how it is going to proceed.
So, what is a retainer fee? According to Investopedia, a retainer fee is, “an advance payment that's made by a client to a lawyer, and it is considered a down payment on the future services rendered by that lawyer.” This means that retainer fees will be kept in a separate account from other accounts that the lawyer has so that the money is used strictly for the services in that specific case.
There are also earned and unearned retainer fees. Unearned retainer fees are the fees that have been paid and placed into a separate account, but no work on the case has been done yet.
On the other hand, earned retainer fees are the portion of the retainer that the lawyer is entitled to after work on the case has begun. For example, after completing the pre-trial process of the case, the lawyer will be entitled to the percentage of the retainer fee that covers the costs of that pre-trial preparation.
Generally, a retainer is non-refundable. It is a payment that secures a lawyer’s services, and that advance payment will then be put towards the costs of handling your case.
If that’s a retainer fee, what is a deposit? According to Legal Paige, a deposit is, “a payment towards the total fee for legal services.” Unlike a retainer fee, a deposit is refundable after the lawyers’ services have been completed, or, if agreed upon, the deposit can be applied to the total costs of the case.
Deposits can also be seen as partial payment for services that have been completed by the lawyer, or, if you and your lawyer agree, it can be applied to additional payments being made throughout the client’s case.
I hope you all found this helpful. Especially when your money is involved, it is important to know what you’re paying for and how your money will be used. If you have any further questions, please don’t hesitate to contact our office to schedule a free consultation!
***The thoughts, facts, and opinions in this blog are in no way legal advice of any form. If you have any legal issues or questions, please contact your attorney or our office.
Sources:
https://www.investopedia.com/terms/r/retainer-fee.asp#:~:text=A%20retainer%20fee%20is%20a,costing%20less%20than%20originally%20planned. https://www.rationalunicornlegalservices.com/blog/retainers-vs-deposits-what-is-the-difference https://thelegalpaige.com/blogs/blog/should-you-use-the-word-retainer-or-deposit
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