Does a lawyer have to put a retainer or an advance on fees and costs into the client trust account?

Plain-English summary

Opinion E-86-9 addressed a lawyer's ethical responsibilities when requesting and receiving a flat fee retainer and an advance toward fees, costs, and expenses. The committee defined a "retainer" as fees paid to secure a lawyer's general availability to a client rather than as payment for a particular representation, noting (per Florida Bar Opinion 76-27) that the term no longer has a uniformly accepted meaning and that its meaning derives largely from individual lawyer-client agreements.

On retainers, the committee concurred with the majority view that a retainer should not be deposited in a trust account (the account required by SCR 11.05 and SCR 20.50) when a clear agreement, preferably written, designates the funds as the lawyer's upon receipt. Depositing such a retainer in a client trust account would violate the commingling prohibitions of SCR 11.05(1) and SCR 20.50(1), since a retainer by definition is the lawyer's property on receipt. The committee cautioned, however, that any non-refundability provision is not without qualification, listing the prohibitions against unreasonable, excessive, and illegal fees (SCR 20.12), the courts' inherent power to determine and enforce fee reasonableness, the voidable nature of contracts made in violation of the Supreme Court Rules (SCR 11.01), discharge for cause, and ambiguity in the retainer agreement.

On advances, defined as funds paid for specific services to be undertaken (such as bankruptcy or divorce representation), the committee concurred with the prevailing majority view requiring deposit of fee advances in client trust accounts until earned, citing SCR 20.50(1)(b) and (2)(d). It pointed out that, effective January 1, 1987, the exception allowing advances for costs and expenses to be kept outside client trust accounts would be deleted, an exception that does not exist in the ABA Model Rules either. Because advances of projected costs and expenses have nothing to do with the lawyer's compensation for services, the committee concluded such advances remain the client's property until their disbursement from the client trust account is required to reimburse the lawyer or pay the costs directly. The committee expressed no opinion on tax consequences and underscored the advisory, non-binding nature of the opinion.

Currency note

This opinion was issued in 1986, before Wisconsin's July 1, 2007 adoption of the revised Rules of Professional Conduct for Attorneys (the state's Ethics 2000 update), and it analyzes conduct under the former Code and a then-pending 1987 amendment to SCR 20.50. The trust-account and safekeeping rules are now found in SCR 20:1.15 / Model Rule 1.15, and the trust-account numbering and specific requirements (including treatment of advanced fees) have since changed substantially. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Does a true retainer have to go into the client trust account?

A: The committee concluded no; a retainer securing the lawyer's general availability should not be deposited in trust when a clear agreement (preferably written) makes the funds the lawyer's on receipt, and depositing it would risk commingling.

Q: Can a retainer be made non-refundable?

A: Per the opinion, a non-refundability provision is qualified; it remains subject to the rules against unreasonable or excessive fees, the courts' power over fee reasonableness, discharge for cause, and ambiguity in the agreement.

Q: Where do advances for fees and costs go?

A: The committee concluded advances for specific services must be held in the client trust account until earned, and effective January 1, 1987 advances for costs and expenses must also be held in trust as the client's property until disbursed.

Background and rules framework

The opinion interpreted the former Code's trust-account and commingling rules (SCR 11.05, 20.50) and the rule against unreasonable fees (SCR 20.12), the areas now governed by the safekeeping-of-property rule SCR 20:1.15 / Model Rule 1.15 and the fee rule SCR 20:1.5 / Model Rule 1.5, alongside ABA Model Rule 1.15.

Citations and references

Rules of Professional Conduct:

• Wis. SCR 20.50, 11.05 / Model Rule 1.15 (client trust accounts; commingling)
• Wis. SCR 20.12 / Model Rule 1.5 (reasonable fees)
• ABA Model Rule 1.15(a) and Comment (safekeeping property)

Cases:

• In re Disciplinary Proceedings Against Marine, 82 Wis. 2d 602, 264 N.W.2d 285 (1978)
• Herro, McAndrews & Porter, S.C. v. Gerhardt, 62 Wis. 2d 179, 214 N.W.2d 401 (1974)
• Baronowski v. State Bar, 24 Cal. 3d 153, 593 P.2d 613 (1979)

Other opinions cited:

• Florida Bar Op. 76-27 (1976); New York State Bar Op. 570 (1985); Hawaii Formal Op. 29 (1985)

See also

• WI Ethics Op. E-88-5: Client Trust Funds and Property
• WI Ethics Op. E-87-10: Recovering Costs in Worker's Compensation Cases

Source

• Landing page: https://www.wisbar.org/formembers/ethics/pages/formal-opinions.aspx
• Original PDF: https://www.wisbar.org/formembers/ethics/Ethics%20Opinions/E-86-9.pdf