Family Law Legal Fees FAQ
What are the components of a client's account?
A client’s account consists of three components. They are the legal fees, the disbursements and the statement of trust funds.
A legal fee is the amount of money that a lawyer receives for the professional services performed.
Disbursements are monies spent by a lawyer on a client’s behalf which the lawyer is entitled to be reimbursed. Examples of disbursements are, money paid to various court officials to issue or file a document, money paid to a process server to serve a document, money spent for psychological, actuarial or business appraisal reports, money spent for photocopying, postage, facsimile machine charges, parking and bank charges.
The statement of trust funds shows what monies were received by the client in trust and how those monies were spent.
What is a retainer?
A “retainer” is the written service agreement between a lawyer and client. “Retainer” is also the word used for the money that the lawyer requests initially before working on the file. I use both types of retainers. The written retainer sets out the work for which you are hiring me for and my hourly rate. It also states other factors, which will determine the amount of the fee. I charge almost exclusively on an hourly rate basis except for, uncontested divorces, wills and estates. In the retainer, I point out other relevant matters including how one can complain to a Court Official about the amount of the account. I ask my clients to read the retainer and return it to me signed. I then make a photocopy of the signed retainer for the client, which should be inserted in the Family Law Manual. Unless I receive a direction to charge a client’s credit card when an account is submitted, which is the most common form of payment now, I obtain a money retainer. I obtain the money retainer in varying amounts depending on the type of file. The initial sum of money is usually set at an amount that will pay for the first stage of work. I do not start work until I receive the money retainer. I also ask for another retainer when the cost of the work performed exceeds the amount of the retainer. At that point, I usually render an account and ask for another retainer. As the written retainer states, if I do not have the account paid in full plus the further retainer requested, then I cannot proceed to work on the file, unless there is a credit card authorization.
Why Money Retainers?
A money retainer, or credit card authorization ensures that when the work is done and an account rendered, the account is paid immediately. The money retainer is deposited into a special trust account from which lawyers do not receive the interest. By law, the interest goes to the Law Foundation of Ontario and 75% of that money from law firms is designated to fund the Legal Aid Plan in Ontario. (A large percentage of Legal Aid is funded this way and only the balance by the Provincial and Federal Governments.) If the retainer is not received in advance, I have several major costs. First, there is the cost of interest between rendering the account and receiving the payment. Even satisfied clients will often put the lawyer’s account at the bottom of bills to be paid. Second, there are the bad debts when people do not pay their account. Third, the time that it takes the lawyer and the secretary to collect outstanding accounts is costly. Fourth, there is the interest on the outstanding accounts. Fifth, there is the stress and frustration brought on by my not being paid for the work done.
When are Accounts Rendered?
I render Interim Accounts at intervals during the cases depending on the time spent and the stage of the proceedings. I give complete details of the time spent such as the date of the service, the type of service performed and how long the service took. Later interim accounts do not repeat the details of previous accounts, except for fees and totals of the disbursements. Therefore, I ask clients to hold onto all accounts in their Family Law Client Manual. Generally, I do not render a final account unless arrangements have been made to pay the final account. The balance owing on a final account should therefore be zero.
How are Fees Determined?
A lawyer’s product is his time. The fee is calculated by multiplying the time spent on a file by the lawyer’s hourly rate. As each client’s problems will take an undetermined amount of time to solve, the client whose case takes more time, pays more. Set fees are given only when lawyers know, almost for a certainty, or within a small range, how much time the matter will take. Set fees are therefore for the average will, an uncontested divorce or a real estate transaction.
Time is recorded for everything that I do, such as talking on the telephone with clients, lawyers and experts, writing letters, receiving letters, consultations with clients, researching, drafting documents, filing documents, developing a strategy, negotiating, travelling to court, waiting at court, advocating in court and reporting to clients. I charge like most lawyers, in time divisions of one tenth of an hour (6 minutes) with a minimum charge of one tenth of an hour.
How is the Hourly Rate Set?
There are many factors, but basically there is a market rate based on years of experience and expertise. It also must be noted that most law firms operate so that their expenses are 45% to 65% of revenues. Though a lawyer may be in the office for eight to ten hours a day, the average lawyer can only bill five to seven hours a day. A lot of time is spent on non billable managerial time. There are no billable hours for vacations, sick days or time spent at continuing education programs.
Is the Hourly Rate a Fair Way to Determine Fees?
In my opinion the answer is, yes. If there is a set fee the lawyer will build in a safety margin for his own protection. Then in the average case the fee based on time probably would be less. If there is a set fee, some clients may improperly waste the lawyer’s time. Whereas if a client knows that he or she is being charged on a time basis, the client will be more careful with the lawyer’s time.
There is the suspicion that a lawyer will spend more time than is necessary, however, there are reasons preventing this from occurring. First, the lawyer’s two main sources of business are repeat clients and referrals. If a lawyer charges too much, he will not do well in business as happy clients are those who have lower legal fees to pay. Second, detailed statements of account showing the service and time spent, indicate if a lawyer spent too much time on certain services. Third, a client can always have the account assessed by having a Court Official (the Master in Ottawa) determine whether the bill is justified.
If the lawyer charges on a time basis there is the suspicion that the lawyer has an interest in not having the parties come to a settlement. Again, a lawyer will not get return or referral business if his or her clients are all spending a lot of money proceeding to court. More importantly, it must be remembered that it is the client who gives the instructions to settle and therefore if a settlement is not reached, it is because the client did not want to accept the offer of the other spouse. Clients only have large legal fees because they cannot agree, not because the lawyer is forcing them to refuse settlement offers.
There is the belief that the lawyer makes more money if there are delays. However, if the file is not being worked on, then no money is being received. The lawyer has an interest in having a file being finished as soon as possible as he gets paid sooner and has a happier client. Unfortunately, the process can be lengthy.
Why Not Set the Fee Based on Value?
This would be very hard to do because value is very subjective. I believe that there is great value in legal services in matrimonial matters and that most fees are greatly undervalued. Going through a divorce can be the most traumatic event in a person’s life. The experience can be worse than a death, even one’s own death.
Children are one, if not the most important aspect of one’s life. Legal fees spent on custody matters, though high, are in my opinion greatly undervalued when compared to other costs in the marketplace. When one sells a $350,000 home the realtor receives 5%, which is $17,500.00. Is obtaining custody or satisfactory visiting rights worth more than the cost of selling a home? Is the cost of an uncontested divorce ($1600 including disbursements) not worth more than a big screen colour television set? I maintain that using the time basis to determine fees is the fairest to both the client and the lawyer. It would be absolutely impossible in every case to have the lawyer and client come to an agreement about the value of the file because of the subjectiveness of the issue. It would be impossible for the lawyer to run a practice if for every file the value to the client had to be determined. On an hourly rate basis, the lawyer can estimate generally his revenues and therefore budget for expenses.
Most objections about the high cost of contested matrimonial matters are due to the fact that clients do not always have the money at the time to pay the fees. The clients have the extra costs of separating and perhaps supporting two households. It is not like a real estate agent’s fee, which comes from the proceeds of selling a house or like the lawyer’s fee for settling a personal injury action, which mostly come from the insurance company as part of the settlement. The client has to pay for the matrimonial lawyer from their income. However, like the purchase of an automobile the lawyers’s fee should be treated like a capital expenditure. If there are no savings the money must be borrowed from a financial Institution or family.
There also may be complaints about fees when one does not get the results desired or anticipated. Lawyers do not charge based on success as measured by the client. The facts of the case and the law are usually the determining factors in the case. Sometimes the upset client will then ask “Well, what did you get me? I am paying more (or getting less) than I wanted.” The answer is that the client received advice and representation, which took the time accounted for on the statement of account.
Can the Lawyer Give an Estimate of the Fees?
I try to give estimates of what a file will cost at varying stages. However, because of many different factors in each case, and unexpected events, that estimate may be quite different from the actual amount. Those factors, which would determine the amount of time and therefore the fee are:
- the emotional state and co-operation of the client;
- the emotional state and co-operation of the opposing party;
- the number of issues (and in Family Law there can be many issues both major and minor);
- the complexity of the issues in both the facts and the law (and again in Family Law because of the newness and uncertainty of recent changes the issues can be very complex);
- the co-operation of the opposing lawyer;
- the court schedule;
- other professionals involved.
It is the negotiating and advocating that are hard to estimate. Once a settlement has been reached it is not very hard to estimate the time and the cost to draft the agreement and perhaps obtain the divorce.
As there are so many issues based on a married lifetime full of facts, and laws that are presently uncertain, that it is common in the average marriage to have many hours invested in the file. If the emotional and co operation aspects are a hindrance then the time spent will be greatly increased. In Family Law there are many procedural steps to have the matter finally resolved, which all take time to prepare and attend. After issuing the action there are the interim motion, the discoveries, the pre trial, and the trial. There may even be an appeal.
How Can Clients Help To Reduce Their Fees?
There are several ways you can help to lower your legal fees. First, be reasonable in the position you take concerning a settlement. The main reason for higher legal fees is that the parties cannot settle. If a client takes an unreasonable position then the matter will not be settled and it will go to court, which is the most expensive aspect of the file. Unfortunately, if your spouse takes an unreasonable position, the fees will be higher unless you agree to those unreasonable demands. Second, use your time with me wisely, which means –
- prepare for the consultations and have the Financial Statement filled out as completely as possible;
- do not treat me as your psychiatrist C stick to the legal issues and not the emotional issues. If you need psychological counselling please get it. I would be happy to refer to the appropriate mental health professionals;
- save up your questions for consultations and therefore reduce the number of calls about single minor matters. Third, help me with the facts of your case by giving me all the information I request the first time, or soon after. It even helps to type out your story and the facts requested.
- be prepared to try mediation if you and I believe it might be appropriate.
How Does the Legal System Try to Keep Fees Lower?
The Government has recognized that Family Law cases can be very expensive and therefore have developed two methods to keep fees lower. They are the pre trial conference and the sanction of costs being awarded against the unreasonable party who does not settle on a fair basis.
It is mandatory in every contested Family Law case that the parties and their lawyers attend at a pre trial conference sometime before the trial. The purposes of the pre trial are to have a Judge or Family Law Commissioner advise as to the likely outcome of the case if the case went to trial and second, to mediate a settlement between the parties if possible. The opinion of the Judge or Family Law Commissioner, which is never seen by the trial Judge, is not binding upon the parties. It should, however, be given serious consideration as it might likely be the outcome if the case proceeded to trial. The pre trial judge’s opinion might not be the same as another Judge who will hear the case and perhaps the facts proven at trial will be different from those taken into account at the pre trial.
The second method to keep costs down involves the offer to settle and costs. Parties are encouraged to make formal written offers to settle with each other. After the trial, these offers are reviewed by the Judge and are compared with the results. If the Judge finds that an Offer to Settle by one party was better than the result that party achieved, then the Court may order the other party to pay the legal fees or part of them to that party because a reasonable offer had been made and was refused. Knowing the sanction of costs, parties should be more inclined to settle and therefore have reduced costs. Though costs may be awarded to a party, that party must still pay the lawyer with a right to collect that payment from the other party.
How Do I, Lawrence Pascoe, Try to Reduce Your Costs?
I try to keep the costs down in several ways:
- I provide informational handouts for the Family Law Client Manual. A client can review this information at home and therefore not as much time is spent during the consultation time.
- I have written a booklet, with an example, showing how to fill out a Financial Statement so less time will be spent in the office filling out the statement.
- I provide copies of all correspondence and court documents to the client so that they know exactly what is happening and less time is spent explaining the file.
- I suggest and encourage methods that the client can use to keep the costs lower.
- I strongly encourage Family Mediation wherever appropriate, which does not necessarily reduce the costs in every case, but if the matter was headed for a costly contested trial, Family Mediation is less costly.
- I use checklists, precedents, systems and technology so that the client and I can make better use of our time.
Are Lawyer's Fees Tax Deductible?
The law has changed over the years, but presently, those fees spent to obtain child or spousal support or to enforce payment of child and spousal support are tax deductible. The payor never gets to deduct his or her legal fees. In each case I will estimate the fees that can be deducted based on the number of contested issues that qualify (child and spousal support) divided by the number of issues that are not tax deductible (custody and asset issues) and provide a letter to that effect if requested for a client to provide to CRA along with proof (their accounts) of what was paid.
I have tried to answer the common questions I am asked and those questions that are probably on the clients’ minds but clients find uncomfortable to ask. If, however, you have other questions, please do not hesitate to ask me.