If you’re looking for a simple way to start 2019 off on the right foot, look no further than attorney flat fee agreements in California! As of November 1, 2018, the California ethics rules changed how flat fee agreements are treated. In this post, you’ll learn about the changes to attorney flat fee agreements in California and what you should do to move forward to continue to adhere to California’s Rules of Professional Conduct.
The New Rules for Attorney Flat Fee Agreements in California
Remember, these changes took effect on November 1, 2018. Here at Zavieh Law, we want to help lawyers avoid being the recipient of an ethics complaint. Carefully read the following summary. Then, read the new rules for yourself.
You may need to provide a partial refund if you don’t complete the representation. One of the changes to attorney flat fee agreements in California is what happens to the money if you don’t complete the representation. Even if you state in your fee agreement that the funds are “earned upon receipt,” you may still be required to provide at least a partial refund if you do not finish out the matter.
You’ll likely need a trust account even if you don’t use it very often. You can learn more about IOLTA accounts by reading this blog post. The post explains how to open a trust account and how to handle retainers paid by clients. Unearned fees, as of November 1, 2018, must be kept in trust. The post also discusses when you may withdraw those funds.
With certain disclosures, you may be able to avoid placing funds in trust. Flat fees paid in advance may be placed into your operations fund only if you provide certain disclosures to the clients:
- The client has the right to require you to put the fee in trust until it is earned; and
- If the client terminates your representation before services are fully complete, the client is entitled to a refund of the unearned portion.
The clients must also agree with this course of action if the fee is greater than $1,000. The disclosures must be made in writing.
What You Should Do as a Lawyer
Moving forward into 2019 with your California flat fee agreement, review and modify your existing document to include:
- The required disclosures;
- Specifically explain how and when the fee is earned;
- Open a trust account if you don’t have one;
- Read the new rules.
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