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Compare Operating Retainer and Trust Retainer: What Attorney Should Know?

Updated: Mar 19

When hiring an attorney, there are many factors to consider, including whether to use an operating retainer or a trust retainer. In this blog post, we will explain the differences between these two types of retainers and provide an overview of their benefits and drawbacks.



TABLE OF CONTENT


What is an Operating Retainer, and How Does it Differ From a Trust Retainer


Operating Retainer Definition

Operating retainers are payments made to attorneys that are held in a client trust account until legal services are rendered. The attorney then deducts their fees from the account at an hourly rate agreed upon by the client and attorney.


Operating retainers provide several benefits to clients. They offer transparency and control over legal expenses. Clients can monitor the amount of money left in the retainer account and request that the attorney provide updates on their billing. Additionally, they provide a sense of security that the client's money will be used only as legal services are performed.


However, operating retainers can be more administrative work for attorneys, increasing costs. They can also be less convenient for attorneys, who may need to hold the funds in a separate account.


Trust Retainer Definition

Trust retainers, or retainer fees, are payments made to attorneys held in the attorney's general account until legal services are rendered. The attorney then deducts their fees as services are performed.


Trust retainers provide several benefits to attorneys. They provide immediate access to funds, which can be useful for attorneys who must pay for a client's case expenses, such as filing and expert witness fees. Additionally, they eliminate the need for the attorney to hold the funds in a separate account, which can save time and money.


However, trust retainers can be riskier for clients, as they may pay for legal services that are never performed. Additionally, clients may have less control over their legal expenses, as the attorney is entitled to keep the retainer fee even if they never perform any services for the client.


Differences Between Operating and Trust Retainers

The key difference between operating and trust retainers is how the money is held and used. An operating retainer has the money in a client trust account and is only withdrawn as services are performed. With a trust retainer, the money is paid directly to the attorney and held in their general account until services are performed.


Another difference is that with an operating retainer, the money belongs to the client until the attorney deducts their fees. With a trust retainer, the money belongs to the attorney as soon as it is paid, and the attorney is entitled to keep the money even if they never perform any services for the client.


Comparing the Benefits of an Operating Retainer vs. a Trust Retainer


Benefits of Operating Retainers

Operating retainers offer several benefits to clients. First, they provide a sense of security that their money will be used only for legal services. This can help clients better manage their legal expenses and avoid unexpected charges.


Another benefit of operating retainers is monitoring the amount of money left in the retainer account and requesting that the attorney provide updates on their billing. This can help clients avoid overpaying for legal services and ensure they only pay for the services they need.


Finally, operating retainers can help build trust between clients and attorneys. By providing transparency and control over legal expenses, clients are more likely to feel satisfied with the legal services they receive and to continue working with the same attorney in the future.


Benefits of Trust Retainers

Trust retainers also offer several benefits to clients and attorneys. The biggest benefit of trust retainers is that they provide immediate access to funds. This can be particularly useful for attorneys who must pay for a client's case expenses, such as filing and expert witness fees.


Another benefit of trust retainers is that they eliminate the need for the attorney to hold the funds in a separate account, which can be a significant administrative burden. This can save attorneys time and money, and allow them to focus on providing legal services to their clients.


Finally, trust retainers can help attorneys build trust with clients. By providing clients with confidence that their attorney has the resources to handle their case, clients are more likely to trust their attorney and feel satisfied with the legal services they receive.


In any case, it is important to carefully review the terms of any retainer agreement before signing it and to work with an attorney with experience in the type of retainer you choose.


Understanding the Risks & Costs Associated with Both Types of Retainers

When choosing between an operating retainer and a trust retainer, it is important to consider the risks and costs associated with each type of retainer.


Operating retainers can be risky for clients if they do not carefully monitor their legal expenses. If an attorney deducts fees from the retainer account without the client's knowledge, the client may be overcharged for legal services.


Trust retainers can be risky for clients if they pay for legal services that are never performed. Additionally, clients may have less control over their legal expenses, as the attorney is entitled to keep the retainer fee even if they never perform any services for the client.


The costs associated with operating and trust retainers can also vary. Operating retainers may require more administrative work on the attorney’s part, which can increase costs. Trust retainers may require attorneys to hold larger sums of money in their general accounts, which can burden smaller firms or solo practitioners.


How to Choose Between an Operating and a Trust Retainer for Your Business

When choosing the right type of retainer, it is essential to consider your individual needs and preferences. Here are some factors to consider:

  • How much control do you want over your legal expenses?

  • How vital is immediate access to funds?

  • How much administrative work are you willing to do?

  • How much risk are you ready to take on?

If you value control over legal expenses and transparency in billing, an operating retainer may be your best choice. On the other hand, if you love immediate access to funds and want to save time and money on administrative tasks, a trust retainer may be the better option.


Choosing between operating and trust retainers will ultimately depend on your needs and preferences. It is essential to carefully review the terms of any retainer agreement before signing it and to work with an attorney with experience in the type of retainer you choose.


By taking the time to understand the differences between operating and trust retainers and carefully considering your needs and preferences, you can choose the right type of retainer for your legal needs.



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