Fees, Trust Accounts and Handling of Client Property
Fees must be fair, disclosed and earned
Fees must be reasonable, disclosed early, and charged for work actually and properly done. Written fee agreements are best practice; contingency or success fees are regulated and sometimes prohibited in criminal or family matters. An estimate is not a cap unless you say so.
Concepts
- Trust versus office account: client money goes into a designated trust/client account, kept separate from the firm's money. Never mix.
- Segregation and ledgers: individual client ledgers, a trust journal, receipts, regular reconciliation and independent audit.
- Withdrawal rules: trust money may be paid out only when earned and billed, on the client's direction, or as the rules permit; a lawyer cannot help themselves to fees.
- Third-party interests: money held for a third party, or subject to a dispute, stays in trust until resolved.
- Shortages: strict liability - make good any deficiency immediately and report it.
- Interest and unclaimed balances: account for interest where required and follow unclaimed-money procedures rather than absorbing the balance.
Traps
Borrowing from trust to cover payroll; debiting fees before rendering a bill; depositing client money into the office account 'temporarily'; using one client's money to pay another's disbursement; accepting large cash payments; treating a general retainer as fully earned on receipt.
Worked example
A firm receives 100,000 on account of costs and later earns 40,000. It may transfer only the 40,000 it has properly billed, with the required notification to the client; the balance stays in trust until earned or refunded.
Rule of thumb: when unsure whether money is trust money, treat it as trust money. Trust accounts are audited, and shortages are treated as dishonesty-adjacent even when caused by error.