Attorneys provide services to clients “on credit” because they generally don’t bill the clients until after they’ve actually provided the services. The danger for law firms is that they will do the work, but the client will refuse to pay the bill. If the bill was for a significant amount of legal fees and costs, the client’s failure to pay can create a huge hole in the firm’s revenue stream and can negatively impact the firm’s cash flow.

Fortunately, attorneys are permitted to ask clients to pay a retainer or an advanced fee deposit that will be used to pay for future legal fees and costs. Frequently, however, the retainer or advanced fee deposit are the only funds that the firm will receive from a client.^[1] If the retainer amount is not sufficient to cover all of the fees and costs, the firm may have to eat the difference.

One way to ensure that the client trust fund always has sufficient funds to pay for ongoing legal fees and services is to require the client to replenish the trust fund monthly so that they maintain a certain minimum balance in trust at all times (this arrangement is called an [simple_tooltip content=’An evergreen retainer is a type of security retainer. Just like other types of retainer, your client pays you a sum up front and you are able to use this money to pay your fees and expenses. The difference is with an evergreen retainer, your client needs to keep a predetermined minimum balance on the account.’]evergreen retainer[/simple_tooltip]).^[1]

So, an evergreen retainer can help to  ensure that the client always has enough money in trust to pay for the current legal fees and costs.^[2]

References

1. Fee Tale: This Is Not Your Father’s Engagement Agreement
2. Keeping Evergreen Retainers Replenished