Does a nonrefundable flat fee have to go in the client trust account in Washington?

Plain-English summary

The inquiry asked how to handle nonrefundable flat fee payments. The committee drew a line based on what the fee actually is. If a flat fee is an advance fee deposit, the fee must be placed in a trust account. If the flat fee is a retainer paid to secure the availability of the lawyer, the fee is considered earned at the time of receipt and is not deposited into the trust account.

The committee then addressed the inquirer's specific facts. A nonrefundable fee paid pursuant to a fee agreement is a retainer, but the committee said that retainer nature is negated by the circumstances the inquirer described, in which the firm would refund the fee if the client requested a refund to change lawyers after only a small amount of work had been done. The committee concluded that no portion of the nonrefundable fee should be placed in the trust account, and referred the inquirer to its earlier Formal Opinion 186.

Currency note

This opinion was issued in 1998, before the Washington State Bar Association's adoption of the 2006 revisions to the Rules of Professional Conduct. 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 Treat this page as historical context, not current guidance.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. Washington's treatment of advance fees and flat fees has been the subject of later rule changes and opinions, so verify the current rules before relying on this analysis.

Common questions

Q: Does a nonrefundable flat fee go in the client trust account in Washington?

A: The committee concluded that a nonrefundable fee paid under a fee agreement is a retainer and that no portion of it should be placed in the trust account.

Q: When must a flat fee be deposited in trust?

A: The committee said that if a flat fee is an advance fee deposit, the fee must be placed in a trust account.

Q: What is the difference the committee drew between an advance deposit and a retainer?

A: A retainer paid to secure the lawyer's availability is considered earned at the time of receipt and is not deposited in trust, whereas an advance fee deposit must be held in trust.

Background and rules framework

The opinion applied Washington RPC 1.5 (fees), corresponding to ABA Model Rule 1.5, and referred the inquirer to the committee's earlier Formal Opinion 186. The committee made the trust-account question turn on the character of the payment: an advance fee deposit (held in trust) versus a retainer to secure availability (earned on receipt).

Citations and references

Rules of Professional Conduct:

• ABA Model Rule 1.5 (fees); Washington RPC 1.5

Other opinions cited:

• WSBA Formal Opinion 186 (handling of fees)

See also

• WA Ethics Op. 1347: Nonrefundable Retainers
• ABA Formal Op. 505: Fees Paid in Advance
• WA Ethics Op. 1826: Charging Fees to a Client Credit Card

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=1031

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Advisory Opinion: 1838
Year Issued: 1998
RPC(s): RPC 1.5; Formal Opinion 186
Subject: Handling nonrefundable flat fee payments

I have been instructed by the Rules of Professional Conduct Committee to respond to your ethical inquiry #1838 concerning the proper handling of nonrefundable flat fee payments.

It is the opinion of the committee that if a flat fee is an advance fee deposit, the fee must be placed in a trust account. If the flat fee is a retainer paid to secure the availability of the lawyer, the fee is considered earned at the time of receipt and is not deposited into the trust account. A nonrefundable fee paid pursuant to a fee agreement is a retainer and that nature is negated by the circumstances described in your inquiry [in which the firm would refund the fee if the client requested a refund to change lawyers after only a small amount of work was done on the client's behalf.] No portion of the nonrefundable fee should be placed in the trust account. The committee directed me to refer you to Formal Opinion 186.