Handling Flat Fees – Ethical Guidance for Pennsylvania Lawyers
Lawyers are ethically required to deposit advance fees and retainers in their trust accounts, commonly called IOLTA (Interest on Lawyers Trust) Accounts and to only take payment after clients receive a statement showing how the funds were used for counsel fees and expenses. In many cases, however, lawyers receive flat fees (one-time fees) or fees that are non-refundable, or fees that are earned as soon as the lawyer receives. Those fees do not have to be deposited into an IOLTA account, and may be deposited into a lawyer’s business account. Thanks to the Pennsylvania Bar Association Committee on Legal Ethics and Professional Responsibility (which attorney Daniel J. Siegel chairs) and the Philadelphia Bar Association Professional Guidance Committee, Pennsylvania lawyers now have clear guidance about when such funds must be deposited into their trust/IOLTA accounts and when they may be deposited into their business accounts.
In Formal Opinion 2022-300, the Committees explain that if a fee is a “flat fee” deemed to be “earned upon receipt,” attorneys may deposit these fees into an operating account rather than a Pennsylvania Rule of Professional Conduct 1.15 IOLTA account or other Trust account. Any fee not “earned upon receipt” is deemed an “advance” fee, which may only be deposited into the operating account if the client provides informed consent, confirmed in writing in accordance with Rule 1.15(i).
Attorney Daniel J. Siegel regularly advises lawyers about the proper language to use when drafting fee agreements and engagement letters. Click here to contact Dan or give him a call at 610-446-3457.
