3 Types of Attorney Fee Arrangements

16 Oct

3 Types of Attorney Fee Arrangements


What Should You Charge?

One of the first questions people ask when they are considering going to an attorney to ask for assistance is: ‘What will it cost?’ The answer to that question can vary greatly depending on the type of assistance they need, the nature of the problem and whether or not it requires the attorney to appear in court. Another thing they must consider that can play a major role in determining the cost of getting legal help is the fee arrangement.

Common Types of Fee Arrangements

There are several types of fee arrangements attorneys and clients use to determine the cost of legal representation. The most common ones are:

1. Consultation Fees
2. Contingency Fees
3. Flat Fees
4. Hourly Fees
5. Retainer Fees
6. Statutory Fees

The fee arrangement is often decided by the type of legal services the client needs. Many attorneys charge a set consultation fee to meet with the client. For certain types of simple legal matters like will preparation or uncontested divorces, many attorneys charge a flat fee. In some cases the price an attorney charges for a service is set by regulation or statute. This is called a statutory fee. It’s when cases falls outside of these set prices that legal representation become very expensive.

1. Contingency Fees

This is a fee structure where the amount of money the attorney receives is based on a percentage of the amount that’s awarded to the client they represent in a negotiated settlement or a judgement. If the client loses the case, the attorney doesn’t receive any payment at all. This type of fee arrangement is commonly favored by medical malpractice and personal injury lawyers. Many attorneys use this type of payment arrangement because it can generate a large number of clients. People are more apt to use an attorney that tells them if they don’t win the case, they won’t have to pay the attorney.

Lawyers don’t even to use law firm billing software when they are being paid on a contingency basis. The standard contingency fee percentage is 33 1/3%. But it can be lower if there’s a quick settlement or higher if an appeal becomes necessary. Sometimes the court limits the size of the lawyer’s contingency fee. Many lawyers only agree to a contingency fee arrangement if they anticipate a large settlement.

2. Hourly Rate

Most attorneys usually use and hourly rate fee arrangement. They can simply log their hours spent on each case-related task into legal billing software. When the case is over, they can simply total up their time and bill the client. Depending on the nature of the case attorneys may charge different hourly rates. For simple tasks like preparing a contract, they might charge $100 an hour. For cases requiring litigation, the hourly fee could be $200 or more. The attorney will also charge extra if they need to use a paralegal or other support staff. When the case is over, the lawyer can compute the total hours it took using law firm billing software.

3. Retainer Fees

Technically, this isn’t a separate fee. It’s like a deposit paid toward the cost of the legal services the attorney provides. Many large businesses and well-known individuals have attorneys on retainer. They’re paid a set amount each week, month, or year to ensure they’re available whenever the client needs them to handle a legal matter. The retainer fee is usually the attorney’s hourly rate multiplied by a specific number of hours. The client usually places the money in a trust account. The cost of the services rendered can then be deducted from the account.

In many cases the retainer fees aren’t refundable. However, if the court deems the fee to be unreasonable, it can be invalidated. This fee arrangement can benefit both the attorney and the client. It guarantees the attorney money whether or not they’re called upon to render legal services. For the client it means they have an attorney “on call” ready to handle any legal problem that arises. When the client’s legal problem is over, the attorney can calculate their total cost using legal billing software.

Choosing the right attorney fee arrangement is important for controlling legal costs. Otherwise clients may need loans to pay their legal fees. The legal services corporation can help clients decide which fee arrangement best suits their needs. When the case is over, the law firm billing software will let both the client and the attorney know if they’ve made the right choice.

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