Retainer and divorce in Illinois

Russell Knight

Russell D. Knight has been practicing family law as a Chicago divorce lawyer since 2006. Russell D. Knight amicably resolves tough cases while remaining a strong advocate for his client’s interests.

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What Is A Retainer In An Illinois Divorce?

Retainer and divorce in Illinois

Lawyers have a peculiar way of charging people. Some professionals will send you a bill at the end of a job and other professionals will require an initial deposit. Lawyers, however, will ask for a retainer before beginning work on a case.  So, what is a retainer in an Illinois divorce case?

A retainer for an Illinois divorce lawyer is a sum of money which the lawyer will hold until that lawyer has earned that money.  The money is not an advanced payment, the divorce lawyer holds the money in trust until that money is earned.

Holding money in a retainer is a peculiar way of doing business that is clearly inefficient. Why not just have an advance deposit and a very specific refund policy.  In my opinion, the retainer system helps build trust between a divorce lawyer and their client by having an elaborate system where the lawyer’s first duty is to hold the client’s money and spend it wisely.

How Is A Retainer Held In An Illinois Divorce?

Client retainers get held in each divorce firm’s client trust account.

“A lawyer shall hold property of clients or third persons that is in a lawyer’s possession in connection with a representation separate from the lawyer’s own property. Funds shall be deposited in one or more separate and identifiable interest- or dividend-bearing client trust accounts maintained at an eligible financial institution in the state where the lawyer’s office is situated, or elsewhere with the informed consent of the client or third person” Ill. R. Prof’l Conduct R. 1.15(a) (eff. Mar. 20, 2009)

What is this interest bearing account that the client’s money is held in? What happens to that interest?

“[A] client trust account means an IOLTA account” Ill. R. Prof’l Conduct R. 1.15(a) (eff. Mar. 20, 2009)

““IOLTA account” means a pooled interest- or dividend-bearing client trust account, established with an eligible financial institution with the Lawyers Trust Fund of Illinois designated as income beneficiary, for the deposit of nominal or short-term funds of clients or third persons as defined in paragraph (f) and from which funds may be withdrawn upon request as soon as permitted by law.” Ill. R. Prof’l Conduct R. 1.15(j)(2) (eff. Mar. 20, 2009)

So, all of the interest from your retainer goes into Lawyers Trust Fund of Illinois which is a not-for profit that helps the indigent and low-income people with legal help

Maybe not getting your interest was a big deal in the 1970s but in today’s zero-interest rate environment, it is not worth worrying about.

How Are Funds Withdrawn From A Retainer In An Illinois Divorce?

When an Illinois lawyer earns the money or pays for an expense to a third party, the lawyer can withdraw the funds from the retainer account.

“A lawyer shall deposit in a client trust account funds received to secure payment of legal fees and expenses, to be withdrawn by the lawyer only as fees are earned and expenses incurred.” Ill. R. Prof’l Conduct R. 1.15(c) (eff. Mar. 20, 2009)

Illinois lawyers have to keep scrupulous records of the money they hold in trust for their clients.

“Maintenance of complete records of client trust accounts shall require that a lawyer:

      (1) prepare and maintain receipt and disbursement journals for all client trust accounts required by this Rule containing a record of deposits and withdrawals from client trust accounts specifically identifying the date, source, and description of each item deposited, and the date, payee and purpose of each disbursement;

      (2) prepare and maintain contemporaneous ledger records for all client trust accounts showing, for each separate trust client or beneficiary, the source of all funds deposited, the date of each deposit, the names of all persons for whom the funds are or were held, the amount of such funds, the dates, descriptions and amounts of charges or withdrawals, and the names of all persons to whom such funds were disbursed;

      (3) maintain copies of all accountings to clients or third persons showing the disbursement of funds to them or on their behalf, along with copies of those portions of clients’ files that are reasonably necessary for a complete understanding of the financial transactions pertaining to them;

      (4) maintain all client trust account checkbook registers, check stubs, bank statements, records of deposit, and checks or other records of debits;

      (5) maintain copies of all retainer and compensation agreements with clients;

      (6) maintain copies of all bills rendered to clients for legal fees and expenses;” Ill. R. Prof’l Conduct R. 1.15(a) (eff. Mar. 20, 2009)

This seems like a lot of detail and responsibility but all Illinois divorce lawyers use practice management software that keeps track of our trust accounts.

Additionally, if you want a lawyer to give you a copy of your invoice, bill, or trust balance a lawyer is always more than happy to offer those documents. It’s just an opportunity to reconcile those accounts and move more money from trust into the operating account.

Do Illinois Divorce Lawyers Have To Use A Retainer?

Illinois lawyers do not have to use the industry standard retainer system. Illinois lawyers can ask for an advanced retainer which is presumed earned upon receipt or Illinois lawyers can offer their services a la cart via a flat fee or limited-scope appearance.

“Funds received as a fixed fee, a general retainer, or an advance payment retainer shall be deposited in the lawyer’s general account or other account belonging to the lawyer. An advance payment retainer may be used only when necessary to accomplish some purpose for the client that cannot be accomplished by using a security retainer.” Ill. R. Prof’l Conduct R. 1.15(c) (eff. Mar. 20, 2009)

But the Illinois Rules Of Professional Conduct require extreme disclosure for non-retainer agreements.  In theory, this is to protect the client. 

“An agreement for an advance payment retainer shall be in a writing signed by the client that uses the term “advance payment retainer” to describe the retainer, and states the following:

     (1) the special purpose for the advance payment retainer and an explanation why it is advantageous to the client;

     (2) that the retainer will not be held in a client trust account, that it will become the property of the lawyer upon payment, and that it will be deposited in the lawyer’s general account;

     (3) the manner in which the retainer will be applied for services rendered and expenses incurred;

    (4) that any portion of the retainer that is not earned or required for expenses will be refunded to the client;

    (5) that the client has the option to employ a security retainer, provided, however, that if the lawyer is unwilling to represent the client without receiving an advance payment retainer, the agreement must so state and provide the lawyer’s reasons for that condition.” Ill. R. Prof’l Conduct R. 1.15(c) (eff. Mar. 20, 2009)

It’s probably just easier for the Illinois divorce lawyer and the client to use the retainer system rather than explain and agree to a flat-fee or advanced retainer under the required rules.

In my opinion, advanced retainers and flat-fees create bad incentives for both the lawyer and the client.  Instead of being a partnership of trust, the lawyer tries to do the least amount of work for a set price and the client tries to get the most amount of work for a set price. 

My father was a contractor who billed by the hour…because he was good. The work got done and the work got paid for.  Everyone was happy at the end.

My brother (who is a really amazing craftsman) bills for work by the day.  You get a full day of work on his terms for a set price.

In the end, the client wants the work done properly and they know that has a cost.  The client certainly can’t control the quality of the work so the client, in turn, can’t control the costs to the penny. In the end, trust and reputation are all that matter.

If there’s a problem, a true professional will renegotiate with the client.

Will I Get My Retainer Back After My Illinois Divorce?

You might get back some of your retainer if the divorce lawyer has not yet earned that portion from the retainer.

A client is “entitled to reimbursement on a quantum meruit basis for the legal services which he has actually performed on his former client’s behalf.” Simon v. Auler, 508 NE 2d 1102 – Ill: Appellate Court, 4th Dist. 1987

For me, there is nothing better than giving a client back a portion of their retainer. The client will tell everyone they know that their Illinois divorce lawyer actually refunded the unused money. 

What Happens When My Retainer Runs Out In My Illinois Divorce?

Some lawyers use an “evergreen retainer.”  The retainer is replenished by the client when the retainer runs out.  This ensures the lawyer is always paid.

I do not use an evergreen retainer policy because at the end of the first retainer, I should have established a trust between myself and the client.  Prompt payment of ongoing invoices is insisted upon but I’m a divorce lawyer.  I understand that life happens.  Payment plans can be arranged or the opposing party can be ordered to pay my attorney’s fees.

If we can’t work something out, I will withdraw from representing the client.

At the end of every case if there is an outstanding balance I will file a Petition For Final Fees. Divorce attorneys are allowed to collect their fees in the very same divorce court which they finalized the divorce in. Typically, I come to an agreement with my client and I memorialize that agreement in an order.

If I cannot come to an agreement with a client who owes my firm money, I go to the judge that oversaw all the work I did on their case and ask for a judgment for my fees.

“The determination of reasonable attorney’s fees and costs…is within the sound discretion of the trial court.” 750 ILCS 5/508(c)(3)

I earlier mentioned that we live in a zero-interest rate environment. Well, the Illinois legislature does not recognize these new market forces.  Judgments in Illinois have healthy interest rates.

“[J]udgments recovered in any court shall draw interest at the rate of 9% per annum from the date of the judgment until satisfied” 735 ILCS 5/2-1303(a)

Or

“[C]onsumer debt judgments of $25,000 or less shall draw interest from the date of the judgment until satisfied at the rate of 5% per annum.” 735 ILCS 5/2-1303(b)(2)

After I obtain a judgment for my outstanding fees, I hire a collections lawyer to collect my fees.

A divorce lawyer should always tell their client the “best case scenario” and the “worst case scenario.”  The best case scenario is that your lawyer is honest and works hard on your case to get the best possible result.  You’re pleased with that result and make an arrangement with your divorce lawyer to pay your fees.

The worst case scenario is that your own divorce lawyer sues you at the end of your divorce case.  A judgment is on your credit report.  The judgment accrues interest at a 5 to 9% interest rate. Your salary gets garnished. 

You don’t want the worst case scenario and neither does your divorce lawyer.  Work something out. 

If you’re ready for a divorce in Illinois or would like to learn more about divorce in Illinois, contact my Chicago, Illinois family law firm to schedule a consultation with an experienced Chicago divorce lawyer.