What Is a Retainer and How Does It Work

Before you hire a law firm for legal services, one of the main things you will discuss with the attorneys is legal fees. You have to make financial sense of how much money you will pay with an upfront payment, an hourly payment, a lump sum, and so forth.

But what is a retainer?

Many people think that a retainer and retainer agreement is precisely the same. But in reality, you might pay an attorney $500 as an upfront payment in exchange for hiring them to give you legal advice on one case. This amount that you pay is called the retainer, and with that money, you retain their services or hire them and their services. If your legal situation is complicated and you need legal services from them beyond the initial advice they give you, then you might have to create a retainer agreement and pay them more. 

What Is a Retainer Lawyer?

A retainer lawyer is a lawyer that you have ready and willing to help you with your legal cases. When you hire a retainer lawyer, that means you give them a deposit that goes into a particular account, and the agreement you have with that lawyer explains how much you are going to pay them and what type of work they should do for you based on that retainer.

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What Is a Legal Retainer Agreement?

A legal retainer agreement is a document that specifies you will have an attorney-client relationship after you pay the retainer fee for the specific period during which time the contract lawyers might do legal work or be there to answer legal questions you have, like general information purposes. 

What is a retainer for a lawyer, and why is an agreement important? 

The agreement is your legal contract should you choose to have a lawyer on retainer. Every agreement you make with a lawyer should be specific to that situation and should be looked over thoroughly between both client and attorney before either party signs. There are, however, some similar features that you should include:

Compensation

Firstly, you want to include a description of the compensation. This means how your legal retainer is calculated and what services you are paying for. You might, for example, have an attorney provide an hourly list of different services they offer and then base the amount on the average number of hours for your type of situation.

Work

You want to explain how the attorney will work using your retainer. If, for example, you are using a retainer fee that you have paid in advance, you have to specify that the attorney has to cover any costs and fees once a specific amount of fees have been incurred.

Additional costs

Talk about what charges might be incurred in addition to your retainers, such as court fees, postage, communications, administrative fees, or travel expenses, and how those will be covered.

Frequency and billing terms

Explain the frequency of billing and the terms for the billing. If you are using a retainer fee that you have paid in a lump sum in advance, you might request that the law firm send you a monthly statement showing how much money has come out of that retainer fee and how much remains in the account. You might also need a separate bill every month or every quarter that shows the additional costs you still have to cover, which are typically due upon receipt.

Disputes

Each state has rules regarding fee disputes. If you dispute your retainer and the billing, you might have to use arbitration, but it depends on where you live.

How Retainers for Lawyers Work?

Using a retainer attorney, work gets done as it usually would. If you are using a lump sum, your attorney will do work on your case or project and then take the money for those costs out of the lump sum. If you hire them with a general retainer, which means you pay them every month regardless of whether you use their services, the work they do will vary based on the terms of your agreement.

For example, if you hire a law firm and you pay them a retainer every month, they might deposit that money into an account and, when the need arises, take money from that trust account. So, if you have a lawyer on retainer for your business every month and you have paid them $1,000 every month for five years when a case does arise, you have $60,000 in that account, which you can put toward the costs of the case. But this is just an example and is entirely contingent upon the type of agreement you have.

How Much Does it Cost to Have a Lawyer on Retainer?

With a retainer lawyer, work is based on the type of retainer you get:

General retainers

General retainers fee sometimes called a monthly retainer, is a fee you pay for a specific length of time rather than for a specific job or project. Basically, with a general retainer, you want to have attorneys or law firms readily available to discuss anything that arises and any questions you have.

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This is a good practice for businesses who want to make sure that in the event there is a complication with their employees, they can turn to the attorney. Similarly, if a company has attorneys on retainer, if the business gets hit with a workers’ compensation lawsuit or discrimination lawsuit, they can turn to the law firm they have hired.

Retaining fee

A retaining fee is a lump sum that you pay upfront. In this situation, an attorney has a separate trust account into which that retaining fee is deposited. Then, as they continue to work on your case or project, they draw money from that account to cover the expenses. If the lump sum you have deposited runs out before the end of the project, you might have to increase the retainer, and if there is any money left over after the project, you get it back.

This is a good practice for businesses or individuals who only have one major project or situation for which they need attorneys. They don’t necessarily want to pay attorneys every month for the entirety that their business is operating, but they do have a legal situation at present where it makes sense to deposit a lump sum upfront.

Special retainer

A special retainer is a flat fee that you pay specifically for one case. Many states prohibit a special retainer because you have to stick with the same attorney until they have finished the case, and this can interfere with any situation where you want to fire and replace the attorney.

In general, the fees might be as low as $500 or as high as $5,000. Legally the retainer fee you pay could be whatever an attorney requests, and it is usually based on their hourly rate multiplied by the number of hours they expect to spend on your case.

Should I Have a Lawyer on Retainer?

For lawyer retainer fees, you should consider hiring a lawyer on retainer if you have a business. A retained attorney can help you look over your contracts to recognize unfair issues, vulnerabilities, or hindrances. Having a business lawyer on retainer can save you time and money should litigation arise. It can also help you circumvent litigation by having an attorney there to answer any questions or provide legal guidance before situations get worse.

What to Consider Before Hiring an Attorney on Retainer

Before you hire an attorney on retainer, consider:

Are they experienced?

Due to the way in which retainer fees are calculated, you might want someone more experienced, especially if you are hiring them for your business. Just because somebody offers a less expensive retainer fee does not mean they are the better option. You should evaluate attorneys on retainer the same way you assess any attorney you would otherwise hire for your personal or professional needs. Check that they have experience handling cases like yours or working in your particular industry. If you are hiring an attorney on retainer to help you check things like employee contracts when you hire new people, make sure the attorney you hired has business experience.

Do you have a legitimate business need for a retainer lawyer?

If you are an individual looking to hire a retainer lawyer to help you with issues involving your homeowners or auto insurance, check your policy. Many insurance policies say that they will cover the cost of an attorney if you are in an accident. You don’t need to pay extra money for a separate attorney if you have such a policy. Similarly, if you are a union member or an employee with a large company, having a lawyer to help you with employer problems might be part of your benefits.

FAQ

Are retainers taxable income?

If attorneys are on a cash basis of accounting, once the retainer is received, it is taxable income.

What’s a monthly retainer?

A monthly retainer is a specific amount of money you pay monthly to your attorney. This type of retainer means you pay every month regardless of whether you use their services that month. You just get to keep a lawyer on retainer for when you might need them.

What is a retainer fee for a lawyer?

This depends on the attorney. On average, costs can range between $500 and $5,000.

How do you calculate a retainer?

A retainer is calculated based on the hourly rate for the attorneys and other legal staff members who might contribute to your task and then multiplied by the average number of hours typically spent on that type of case.

Conclusions

Overall, paying a retainer means that you are hiring an attorney, and the money you pay them to handle your legal situation is your retainer. Once you sign an agreement with them, you have signed a retainer agreement where your attorney agrees to work on your behalf in exchange for compensation.

Article by Sofi Ostymchuk

Sofi Ostymchuk is a Content Lead and Legal Writer at Lawrina. Sofi manages the content on the blog, communicates with contributors, looks for interesting topics, and creates articles in cooperation with lawyers and law experts. If you would like to be a blogger for Lawrina, you can contact Sofi for all the details via email at s.ostymchuk@lawrina.com.

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