What Is a Retainer Fee? Types, Rules and How Law Firms Handle Them

"Retainer" is one of the most used words in legal billing, and one of the most misunderstood. Clients think of it as a down payment. Many lawyers use it to mean any money collected upfront. And under the ethics rules, most of what gets called a retainer is actually something else, which changes where the money has to be deposited and when the firm can use it.

This guide explains what a retainer fee is, the main types, what the ABA rules say, how retainers move between trust and operating accounts, and how to record them in your books.

What Is a Retainer Fee?

A retainer fee is money a client pays a lawyer at the start of a representation. In most cases, it's an advance payment for future legal work. The lawyer holds it in a client trust account and draws from it as the work is done and billed. Any amount not earned by the end of the matter goes back to the client.

There's also a narrower meaning. A true "general retainer" is a fee paid only to reserve a lawyer's availability, not for any specific work. That kind of retainer is rare, and it's handled differently.

Is a retainer fee the same as a deposit?

In most cases, yes. An advance fee retainer works like a deposit against future work. The client still owns the money until the lawyer earns it. A general retainer is different because it pays for availability, not for work.

Types of Retainer Fees

Here are the types of retainer fees law firms use, and how each one is handled.

General retainer (true retainer)

A general retainer, sometimes called a true or availability retainer, is paid to make sure a lawyer is available to the client for a set period. It doesn't pay for any legal work, so work done during that period is billed separately.

Because it pays for availability, a general retainer can be treated as earned when received. But the ABA notes these are rare today, and a general retainer can still be found unreasonable or unearned if the lawyer isn't actually available to the client.

Advance fee retainer (security retainer)

This is what most people mean by "retainer." The client pays a set amount upfront, the firm deposits it in trust, and fees are drawn from it as work is billed. Some firms call it a security retainer because it secures payment for future work.

Until the work is done, the money belongs to the client.

Evergreen retainer

An evergreen retainer is an advance fee retainer that the client agrees to top up. When the trust balance falls below a set minimum, the client pays enough to bring it back to the original amount. It's common in litigation and ongoing matters where the work continues for months. Our guide on how to manage evergreen retainers covers the setup in more detail.

Flat fee paid in advance

A flat fee is a fixed price for a defined piece of work, such as an uncontested divorce or a basic estate plan. If the client pays it before the work is done, ABA guidance treats it as an advance, not a general retainer. That generally means it goes into trust and is earned as the work is completed.

Some states allow a flat fee to be treated as earned when received if the written agreement meets specific requirements. Others don't. Check your state's version of Rules 1.5 and 1.15 before you set up flat fee billing.

Special retainer

A special retainer covers one specific matter, as opposed to an ongoing relationship. It's usually an advance fee in practice and is handled the same way: deposited in trust and earned as the work is done.

Retainer Fee Rules: What ABA Formal Opinion 505 Says

In May 2023, the ABA issued Formal Opinion 505 on fees paid in advance. It's the clearest guidance on retainers, and it comes down to a few points.

Advance payments belong to the client until earned. Money paid for future work is unearned when received and stays unearned until the work is performed.

Advance payments go into the trust account. ABA Model Rule 1.15(c) says legal fees and expenses paid in advance must be deposited into a client trust account and withdrawn only as fees are earned or expenses are incurred.

Labels don't change the rules. Calling a payment "nonrefundable," "earned upon receipt," or an "engagement fee" doesn't make it earned. The ABA's word for it is that there are no "magic words."

Unearned money must be refunded. If the representation ends early, Rule 1.16(d) requires the lawyer to return any part of an advance payment that hasn't been earned.

General retainers are rare. The opinion says true availability retainers are "quite rare and not consistent with the modern practice of law," and suggests most retainers should be described as advances.

Fees must be reasonable. Rule 1.5(a) applies to every fee, including retainers.

Can a lawyer charge a nonrefundable retainer?

A lawyer can write "nonrefundable" in an agreement, but under Opinion 505 that word doesn't make an advance payment earned. If the client ends the representation before the work is done, the unearned portion still has to be refunded. The only fee that may be truly earned on receipt is a genuine general retainer for availability, and even that has to be reasonable.

Do retainer rules differ by state?

Yes. ABA Model Rules are a template, and each state adopts its own version. The biggest differences are in how flat fees are treated and what a written fee agreement must say. ABA opinions guide most states, but your state's rules and ethics opinions are what apply to your firm.

Does a Retainer Fee Go Into a Trust Account?

Most retainer fees do. Advance fee retainers, evergreen retainers, special retainers, and flat fees paid before the work is done generally go into a client trust account. A true general retainer paid only for availability is the main exception, and it can usually go into the operating account.

For most firms, small or short-term retainers go into a pooled IOLTA account. IOLTA participation is mandatory in 47 of the 53 jurisdictions the ABA tracks. See our guide to IOLTA rules by state for your state's requirements. Larger amounts held for a long time may go into a separate interest-bearing trust account for that client.

When can a lawyer withdraw retainer funds?

Only after the money is earned. For hourly work, that's after the time is worked and billed. For a flat fee, it's as the work described in the agreement is completed. Most firms move money from trust to operating when they send the invoice, and they tell the client what was withdrawn. Taking money out before it's earned, even for a day, is one of the trust accounting mistakes that lead to bar complaints.

How Does a Retainer Fee Work? Examples

Hourly retainer example

A client pays a $5,000 retainer. The lawyer bills $250 an hour.

1. The firm deposits $5,000 in the trust account and records it on the client's trust ledger.
2. In month one, the lawyer works 8 hours. The firm bills $2,000, sends the invoice, and moves $2,000 from trust to operating. The trust balance is now $3,000.
3. In month two, the lawyer works 4 more hours, and the matter ends. The firm bills
   ,000 and moves it to operating. The trust balance is $2,000.
4. The firm refunds the remaining $2,000 to the client.

Example from ABA Formal Opinion 505

The ABA's opinion uses this example. A client pays a $6,000 "retainer" for a divorce at $300 an hour. The lawyer pays a