Flat Fees and Legal Trust Accounting: Tips for Staying Out of Trouble

Flat Fees and Legal Trust Accounting: Tips for Staying Out of Trouble

A recent post by Larry Port on Legal Productivity under the heading, "Avoid Disbarment," bears a precautionary mention.  We've talked a lot about alternate fee structures and how the legal industry will need to evolve in order to accommodate the needs and demands of clients.  In your efforts to please your customers, be sure you are very careful about how you handle your trust account.   Port uses a recent Washington, D.C.  Bar Court of Appeals decision to emphasize how NOT to handle up-front flat fees.  Essentially, you can't deposit them into your operating account, you have to actually earn the money from the up-front  fee, and you can't artificially inflate or front-load your work.

"In sum, a flat fee is an advance of unearned fees because it is money paid up-front for legal services that are yet to be performed."
- In Re Robert W. Mance III, 2009 D.C. App. LEXIS 473 (2009).

Port advises that the best way to handle up-front fees typically is to arrange transfers to your operating account when various milestones are reached.

For additional insights and a copy of Legal Productivity's free white paper on Understanding Trust Accounts, follow this link: http://info.rocketmatter.com/understanding-trust-accounts-for-legal-professionals/?utm_campaign=Legal-Productivity-Blog&utm_source=Legal%20Productivity%20Blog