Lawyer fee structures
You probably know that legal services can be expensive, but attorneys don’t always charge the same rate or even structure their fees in the same way. However, most attorneys will use one of the following payment options when charging you for their services:
- Hourly rates
- Flat fees
- Contingent payments
Let’s take a closer look at each of these.
Hourly rates are the most straightforward legal fee options.
With this approach, an attorney will charge you a specific amount for every hour that they spend working on your case. Your total bill will depend on the number of hours worked.
Hourly rates can vary a lot, depending on a lawyer’s experience and location. For example, rural attorneys usually charge lower rates than those in major urban areas. However, think carefully before choosing a lawyer just because their hourly rate is low. If they aren’t very experienced, they could end up costing you more in the long run by taking longer to help you than someone more experienced.
Flat fees are another straightforward fee structure. When an attorney charges a flat price, you know exactly how much you are going to pay regardless of how much time is involved.
It’s common to find flat fees for more simple, predictable legal matters like wills and bankruptcy fillings.
Make sure that you know what a flat fee covers! They may not always include incidental expenses, so always find out what is not included. As with hourly rates, flat fees will vary according to attorney experience and location.
Retainers are advance payments which lawyers keep in a trust account and draw from whenever their clients require legal help. They can be an attractive option for people who need legal services regularly and have a good working relationship with a particular attorney.
Bear in mind that most retainers are non-refundable!
In other words, if you pay an attorney a retainer and later decide to drop whatever it is that your lawyer is working on, then you may forfeit any portion of your retainer that is left over. While it is possible to be refunded if a court deems your retainer unreasonable, don’t bank on this.
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When lawyers agree to a contingency fee, they forfeit any payment in advance. In return, they receive a percentage (usually one third) of any settlement or money which you get as part of a favorable judgment.
One third may be standard practice, but you can always try to negotiate a better rate!
Contingent fees are usually charged for cases involving personal injury (e.g., medical malpractice) and debt collection. They are not allowed for some instances, like divorces, criminal hearings, and child custody battles.
Tips for limiting your legal costs
- Don’t be afraid to ask!
Before you hire an attorney, always ask about their fee structure and make sure that you fully understand how it works. If a lawyer isn’t willing to talk about their billing openly, then it is probably a good idea to find a better attorney.
- Clarify other costs.
Attorneys will often use paralegals and other support staff, so always find out what their rates will be. Legal cases can also involve additional costs, like court fees and delivery charges. Clarify all of these since the last thing that you want is to be billed for expenses, which you never anticipated!
- Get it in writing.
Attorneys can make mistakes like anyone else, so always ask for a documented copy of a lawyer’s fee structure. If an attorney refuses to put your verbal agreement in writing, then start looking for a more professional attorney!
- Insist on itemized billing.
When you contract an attorney, make sure that your agreement includes a clause requiring them to prepare itemized bills for you. Itemized bills will list all of your lawyer’s fees and expenses so that you can see what you are paying for.
- Set limits.
It is often a good idea to decide on a maximum fee for legal services in advance so that you don’t end up paying more than what you can afford or more than what is worthwhile. Insist that your lawyer contacts you for permission to exceed your limit if necessary.
5 Steps to Paying the Right Price for Your Attorney
The rise of sites like LegalZoom and RocketLawyer has helped some people to tackle legal tasks without the assistance of an attorney. Let’s put scare tactics to the side and be realistic. Some people simply can’t afford a lawyer.
While the Internet has made it easier to take care of some simple tasks, complicated legal issues are tough to tackle without the assistance of an attorney. Still, there are some cases where some will not be able to afford an attorney, but they have to get something done (say, filing for an uncontested divorce).
If you have to do it alone, then the best advice I can offer is to look for the best help that you can afford (whether it’s a book or an online resource) and try to find free resources in your community.
If you need to hire a lawyer and your budget is restricted, there are a few things that you can do to lower the cost of your representation. This article will point out five key considerations that you should factor into your search for quality legal representation.
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- STEP 1: MARKET RESEARCH
Ask people who you know well who they have hired in the past. This part of the search is a bit like connecting with a high school classmate on Facebook. Have you ever noticed that when you re-connect with one friend from high school on Facebook, you rapidly end up connecting with other classmates within just a few days? The process works the same way with attorneys. Once you connect with one attorney, you can quickly connect to the specific kind of attorney that you need. The critical thing is to go past the first attorney that you find and find other attorneys who practice in the same area of the law.
As you talk to more attorneys, you will get a better sense of how they bill and how much representation ought to cost in your area.
This knowledge will help you to figure out whether a two-person law firm that focuses on business law should bill at $250 per hour or $450 per hour. More research will help you to figure out the general costs in your market.
- STEP 2: NEGOTIATE
I know what you’re thinking. How will I win a negotiation with a lawyer? The truth is that you aren’t trying to “win” anything. There’s more to negotiating than getting things for less. Sometimes, you’re arranging to get more for free. For example, you might tell the lawyer that you need to cap costs so you can ask if they can give you a break on copying and faxing fees.
Another example of a high cost to negotiate is the rate for paralegals and support staff. The lawyer may be reluctant to reduce their fees, but they might be more flexible about lowering the cost for support staff.
- STEP 3: BE CREATIVE
Say you are in the middle of finishing an agreement, be it a partnership agreement, divorce agreement, or a contract that you often use for different clients. If you need to make continuous small changes, talk to your attorney about a discounted price for making those small changes required. It’s great for lawyers to have repeat clients, and they may make the changes for little or no charge.
- STEP 4: IF IT ISN’T WORKING OUT, CUT YOUR LOSSES EARLY
Some people just can’t work together. In some cases, no amount of effort will help some relationships to work. If you do your research and you end up with a lawyer that just doesn’t work for you, don’t force it. Figure out how to wrap things up so that you’re business/ personal issues aren’t negatively impacted and pull the trigger.
I’m not saying that you have to channel your inner Donald Trump and tell the person that they’re absolutely, positively fired. You can simply say to the attorney that you appreciate his representation to date, but you want to hire someone else.
There’s no reason to continue to throw out good money if the attorney you hired isn’t working out for you. Some clients will ride along with an attorney that they despise to the bitter end. The results are usually not very good.
- STEP 5: LEARN HOW A FEE ARRANGEMENT AGREEMENT WORKS BEFORE YOU SIGN IT
If an engagement is on an hourly fee basis, you will want to know the hourly rate, the minimum billing increments (e.g., 10, 20, or 30 min).
Ask what other charges are not included in the agreement- faxes, phone calls, e-mails, copies, etc. Anticipate filing fees and additional costs that the attorney can provide before you retain their firm.
Ask similar questions before you sign a contingency agreement.
Question the attorney about the amount of time it will likely take for the case to settle/ go to court and the percentage that the attorney will receive from the ultimate judgment.
Remember that this percentage is usually negotiable. I’m not saying that you can go from 33% to 5%, but I am saying that a contingency fee of 40% would strike me as a bit rich and I would probably either negotiate the percentage with that firm or take a look around before you ultimately settle on a firm.
There are other factors that you should consider in getting the best value for your money when you’re hiring a firm. We would especially love to hear your insights on best practices in hiring an attorney. Please feel free to leave your comments below.
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