Understanding Legal Fees, Payment Plans, and Other Costs of Military Divorce (Part 1)

There are three basic types of legal fees; hourly fees, flat fees and contingency fees. Because contingency fees (a percentage of the client’s recovery) are not permitted in domestic relations cases (and are usually applicable in personal injury cases), I will not waste your time discussing them.

A flat fee is a set price for the entire representation. It is seldom used in a domestic relations case (and is more commonly used in criminal cases or will drafting). One thing you should remember about a flat fee is that the attorney is not allowed to remove any portion of the funds for his fees until the job is completed.

I believe that the flat fee arrangement creates an inherent conflict between the attorney and the client. It pays the lawyer more for doing less. If the flat fee is $2,000 then the attorney earns $1,000 an hour if he can resolve the case in two hours but he only earns $50 per hour if it takes him 40 hours. The incentive is contrary to the client’s interests. In criminal cases, you can often hear a lawyer urging the client to accept a plea offer because he won’t be paid any more money if the case goes to trial.

In domestic relations matters almost all attorneys charge an hourly fee. (The current rate in the Washington, D.C. area for family law attorneys is between $250 and $500 per hour depending on the attorney’s location, experience and marketing skill. Often there are several lawyers at the same firm with different billing rates. You might interview the managing partner who charges $500 an hour for his time but much of the work on your case is delegated to an associate who charges $250 per hour. This is not a “bait and switch” but a delegation of duties that saves the client money and allows the more experienced attorney to work on matters that require his expertise. 

During the initial consultation, a lawyer tries to estimate the amount of legal fees and expenses that the representation will require. Based on this estimate, the attorney will ask for a retainer fee. The retainer fee is not a flat fee, but a deposit that is maintained in a separate bank account called a “client escrow account.” The retainer fee assures the attorney that he will be paid if he performs work on the case. Each month (or twice a month) the law firm should send the client a billing statement (as well as an escrow statement) and withdraw the funds necessary to pay the bill from the client’s escrow account.

At the end of the representation, if there is still money remaining in your client escrow account it is refunded to you (this is your money). If the legal fees and expenses exceed the amount provided as a retainer fee, then you will owe the difference. It is important to get monthly statements showing the balance remaining in your escrow account and a clear description of all charges billed to you. You would be surprised how many lawyers don’t send out monthly statements.