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Understanding Legal Fees

Attorney fees can cost a pretty penny. They depend on what type of case you have and how much time an attorney will spend. There are several different types of fee arrangements. Attorney fees are usually calculated without including court costs and filing fees that are usually paid upfront by the client. Always ask potential attorneys to explain their fees and billing practices prior to engaging their services.

What’s the basis for a legal fee?
Attorney fees are generally a matter of agreement between the client and the attorney. There are no recommended fee schedules. While fees vary, the basic ingredient is the amount of time spent on a particular case. Clients are often unaware that the advice given to them in a few minutes or a few pages of a document prepared for them are products of much time and effort by the attorney and often by others in his or her office.

How do lawyers compute their fees?
There are four usual methods of calculating legal fees: Hourly fee arrangements; contingency fee arrangements; flat fee arrangements; and percentage fee arrangements.

Hourly fee arrangements and charges depend on case circumstances and lawyer experience. Under this arrangement, the client is generally responsible for the out-of-pocket expenses (filing fees, transcripts, sheriff's fees) as well as for the time spent performing the legal work (meetings, research, drafting documents, phone calls).

Contingency fee arrangements are used primarily in personal injury and collection cases. They’re not allowed in criminal or divorce matters. The lawyer receives no fee unless money is recovered for the client. If money is recovered, the lawyer receives an agreed-upon percentage of the recovery, generally ranging from 25 to 45 percent. The percentage often depends upon the amount of work anticipated, the probability of recovery of witness fees, and the complexity of the issues involved. If there’s an appeal, the percentage can be higher. Contingency fees can be compiled prior to the conclusion of the matter, and the client may be responsible for all out-of-pocket expenses such as filing fees and depositions. If an attorney is dismissed by the client prior to the conclusion of the matter, the client may be responsible for payment of a reasonable fee for services rendered by the attorney. All contingency fee agreements must be in writing and signed by both the attorney and the client.

In flat fee arrangements, the attorney will render a specific legal service to the client for a fixed sum of money. Criminal defense matters or the preparation of a simple will are often the subject of a flat fee arrangement. If there are unexpected complications, it’s sometimes necessary to modify such an arrangement.

Percentage fee arrangements are sometimes used in the administration of an estate or in the selling or purchasing of a home. The fee would then be a fixed percentage of the estate or the value of the property being transferred.

When should you discuss fees?
The lawyer and the client should discuss the cost of the legal services at the initial meeting. The lawyer may not be able to forecast the exact amount of the time and effort required, but should be able to give the client an estimate based upon the information provided and the lawyer's past experience. The client should not hesitate to raise the issue of legal fees at any time with his or her attorney. The client has a right to a detailed billing showing the lawyer's time and efforts in those instances where the fee is based upon an hourly rate.

Who’s responsible for the fees?
The client must pay the fees and expenses. In some cases that go to court, the judge may award a partial or full fee to be paid by the opposing side. This does not release the client from the obligation to pay the attorney.

When is the fee paid?
Most cases require a retainer fee or deposit to apply to the lawyer's expenses or future charges. Clients should expect to pay when they retain an attorney. The attorney will generally bill on a monthly basis and the client is expected to remain current. A contingency fee case is billed upon completion of the case, except for expenses incurred.

Can legal fees be limited?

Consider a written fee agreement during the initial meeting. The client should ensure that he or she is totally familiar with the basis on which the fees will be calculated. If the lawyer's work is concluded and the fees required are less than the amount of the retainer, the balance will be refunded. Being fully prepared with documents and information at the initial meeting can often reduce the time an attorney must spend seeking that information. The client should be as brief as possible in all communications and refrain from frequent phone calls for which he or she will be billed. The client should always communicate openly and honestly with the attorney. Failure to do so can often result in added expenses.

Can I fire my attorney?
Remember that you’re the boss when it comes to your attorney. If you’re not satisfied with the work, you’re entitled to terminate his or her services; however, you must pay for services rendered up to the date of termination.

Source: U.S. Small Business Administration


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