Chapter 2: Attorney Fees:

So how much will it hurt? Attorney fees are typically not cheap, but if you want quality representation, you will need to balance how much you can afford to pay with the level of expertise you feel you need to successfully handle your legal matter.

Types of Fees

As with every profession or calling, the basic ingredient in fees is the amount of time spent on a particular problem. In the legal profession, it depends on: the complexity of the matter, the documents which must be drafted, the number of letters, phone calls and interviews, the research, the number and length of court appearances, and law office expenses. The market rate also varies by geographic area and may be regulated by law.

Lawyers typically charge clients in one of the following ways (keep in mind there is no absolute standard and these billing options can be creatively combined):

Consultation Fee: You may be charged a consultation fee, which is either a fixed or hourly fee, for your initial meeting with a prospective attorney. Some attorneys do not charge for an initial consultation.

Hourly rate: The lawyer bills you at the rate of a certain number of dollars per hour worked (example: rate is $150/hour, hours worked on your case is 2 hours, the charge is $300). These rates will vary with firm size and experience of the attorney. Hourly rate may also differ depending on the type of work the attorney is performing (i.e. court appearances vs. making a simple telephone call). Lawyers may also charge different hourly rates depending on who in the firm handles the legal matter, such as a paralegal, law clerk, or junior associate.

Contingency: The lawyer takes his or her fee out of the amount recovered through a lawsuit or settlement. If you are the loser, the attorney gets nothing. In most cases, you are still responsible for any expenses. If you are on a retainer arrangement, make sure your fee agreement spells out whether expenses will be deducted from the recovery before or after the lawyer’s share is calculated (you want before since it puts more money into your pocketbook). The more common contingent fees charged are 33-1/3% of the gross recovery, but can run as high as 50% because the case is complex, time-consuming, or risky. “Contingency fee” arrangements are commonly used in accident and personal injury, employment discrimination, workers compensation, medical malpractice, products liability, and collection cases.

Task-based or Flat Fee: This is based on the type of legal matter, such as the preparation of a simple Will, or Power of Attorney, or an uncomplicated personal bankruptcy where the time involved is predictable.

Statutory fees: In some matters (e.g., probate, social security disability, or bankruptcy), fees are set by law or by a court.

Asset-based fees: In many types of matters, the amount of money involved is critical in determining the legal fee. For example, in residential real estate contracts and closings the price of the house often is the key basis for the fee. The fee on a $1 million home will be several times that of a $100,000 home even though the work is typically not several times greater, because the exposure is 10 times greater. Similarly in probate matters, fees often depend on the amount of the assets in the probate estate.

Retainers and Referral Fees

A retainer is a down payment that is applied to future bills. The retainer amount is typically placed in a special account and fees are deducted from that account as they accrue. Some retainers are non-refundable. When you have exceeded the number of hours worked on your case, you will be required to pay the balance when billed. If money is tight, ask the attorney if you can pay in installments. This arrangement may be used by large companies who put the services of an attorney on “retainer” for a specific period of time; in other words, the attorney is “on-call” should legal issues arise.

Referral fees are fees paid by one lawyer to another for a positive referral. The fee consists of a portion of the amount you pay your attorney for handling your case. It must be reasonable under the circumstances and you must agree to it for the arrangement to be legal.

How do I keep legal fees under control?

To avoid putting a dent in your bank account, ask for a prearranged ceiling or limit on your fees. Also inquire about methods you can use to reduce the costs, such as contacting witnesses, obtaining documents, etc.

To ensure that your legal bill does not spin out of control, have up front discussions about fees, expenses and your ability to pay. The amount an attorney will charge will depend on the amount of legal work you want or need and the attorney’s expertise in that field. If you are willing and able, you can do some of the legal legwork yourself in consultation with your attorney and perhaps some books or CDs to help fill in the gaps. Some attorneys are more amenable than others to this type of collaboration, but a resourceful client can save possibly hundreds of dollars in fees by doing some of it themselves.