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How Much will it Cost?
There are a number of different
kinds of fee arrangements, some of which need to be in writing and some
of which (depending on your state) may not need to be in writing. You
should also keep in mind that sometimes it is impossible for a lawyer to
know exactly how much time your case will take. In that instance, you
can ask the lawyer to include in a written fee agreement or letter an
estimate of the costs and time involved. However, you should keep in
mind that many factors may affect the lawyer's estimate and that the
actual cost may be greater than the estimate. You should also be careful
to tell your lawyer everything you know about your case, as a variety
of factors can influence the complexity (and therefore the cost) of your
Here is a brief explanation of some of the different types of fee arrangements that a lawyer might enter into with you and some questions you might want to ask about each:
Hourly Fee Agreements
Hourly fee agreements are exactly as they sound - the lawyer charges you a set hourly fee for each hour that they work on your case. In addition, the lawyer will charge you for out of pocket costs such as copying costs, postage, filing fees, and online legal research. Hourly fees range incredibly from lawyer to lawyer. Factors that often influence a lawyer's hourly rate include: location (lawyers in large cities often charge more than those in rural areas), years of experience, degree of difficulty or specialty of practice, and - in some instances - ability to pay. (Some lawyers offer sliding scale rates for people with low incomes.) Hourly fees are sometimes negotiable, particularly if you are likely to bring a lot of work to the firm or attorney. Questions to ask include:
With a capped fee, the lawyer charges his or her regular hourly rate, but agrees to a fee "cap" of a certain amount so that the fee never goes over the set limit, even if the matter requires more hours than had originally been anticipated.
Flat Fee, Fixed Fee, & Standard Fee
Flat fees involve a set price for a set service and are used most often for routine legal matters. For example, a lawyer may charge all clients the same set amount to draw up a simple will or to handle an uncontested divorce. When you agree to a fixed fee, be sure that you know what it does and does not include. You also should find out if any other charges might be added on to the bill.
Contingency fees are often used in
personal injury, accident, and other cases where you are suing someone
for money damages. It means that you pay the lawyer a certain percentage
of the money that you receive if you win the case or if you settle the
matter out of court. If you lose, the lawyer does not receive a fee.
Either way, though, you may have to pay any court costs and other
out-of-pocket expenses that are involved. Depending on the
circumstances, these charges can be quite high. (For example, the cost
of paying court stenographers and expert witnesses can often be
significant.) So be sure to ask the lawyer to estimate these costs. In
some cases (and in some states), the lawyer may pay some of these costs
for you up front, and then get reimbursed using money you receive from
the case. Even where this is the case, though, you remain ultimately
responsible for these costs even if your action is unsuccessful.
If you agree to a contingency fee, be sure that you understand how the contingency fee will be calculated and how (and when) other costs are deducted. For example, suppose you are awarded $100,000 in a personal injury case and, under the contingency agreement, your lawyer is entitled to 40 percent. Lets also assume that court costs and other expenses amounted to $8,000, which your lawyer paid in advance for you. If your lawyer's share is calculated after the $8,000 is deducted, the lawyer will receive 40 percent of $92,000 - or $36,800; $8,000 will go towards costs, and you will receive $55,200. But, if the lawyer's share is calculated before costs are deducted, the lawyer will receive 40 percent of $100,000 - or $40,000; $8,000 will go towards costs, and you will receive $52,000.
Contingency fees often range from 25 percent to more than 40 percent and sometimes take into account when in the process the case is resolved. For example, an agreement might provide that if the case is resolved before trial, the lawyer receives 30 percent; after trial, 35 percent, and after an appeal, 40 percent.
In some limited situations, courts may also award attorneys fees (for example, this is sometimes done in discrimination cases). If a court-awarded fee is a possibility, the contingency agreement should address that situation as well. Often, contingency agreements provide that, if a court awards fees, and those fees are less than what the lawyer would have collected under the contingency agreement, the client is responsible for paying the difference. If the fee awarded by the court is higher than the contingency fee would have otherwise provided, the lawyer keeps the entire amount, but the client owes nothing additional.
Remember that in most states, contingency fee agreements must be in writing.
Lawyers are sometimes willing to be creative in setting fees, combining both reduced hourly rates and a reduced contingency component. For example, a lawyer who typically charges $150 an hour, might agree to a bended rate of $75 per hour, plus a 15-20 percent contingency. If this is an arrangement that interests you, you should broach the subject with your attorney.
Retainer agreements have very
different meanings to different people, so it is imperative that you
understand the fee agreement being proposed.
Sometimes a "retainer" is nothing more than a down payment for future services. Often, a lawyer will request a retainer to ensure payment for services rendered. (Note: Retainers must be placed into a separate client fund account until such time as the lawyer actually bills the client for services. In most states, the interest from such accounts is paid to a fund called an IOLTA fund, which provides grants to organizations that provide legal services to the poor and underserved.) Sometimes an attorney may ask for an "evergreen retainer" which means that, each time money is taken from the retainer to pay for costs or services, the client is expected to replenish the retainer to its original amount. In any event, at the end of the engagement, you are entitled to the return of any unused funds. You are also entitled to a full accounting of withdrawals from your retainer.
In other instances, retainers are used to guarantee that the lawyer will be available to take a particular case. This could mean that the lawyer would have to turn down some other cases in order to remain available. With this kind of retainer fee agreement, the client would be billed additionally for the legal work that is done. A retainer fee also can mean that the lawyer is "on call" to handle the client's legal problems over a period of time. Certain kinds of legal work might be covered by the retainer fee while other legal services would be billed separately to the client.
Other Fee Arrangements
In these modern times, it is becoming more and more common for lawyers to be willing to engage in discussions of more creative billing structures (particularly for corporate clients). Such arrangements might include: