Evergreen Retainer vs. Regular Retainer: Which Protects a Law Firm’s Cash?

What the engagement letter has to say for an evergreen retainer

ABA Model Rule 1.5(b) has “the scope of the representation and the basis or rate of the fee and expenses for which the client will be responsible” communicated to the client, “preferably in writing,” and any change in the basis or rate communicated too. Comment [5] to the same rule warns against an agreement to provide services only up to a stated amount when more work is foreseeable, unless that is explained, because otherwise “the client might have to bargain for further assistance in the midst of a proceeding or transaction.” Writing down at the start how the deposit is refilled, and how the target can rise before a heavier phase, moves that conversation to the beginning of the matter. Whether a given clause is enough, and how the firm’s state words these rules, is the firm’s attorneys’ call.

As an operations matter, a letter the billing team can actually run states each of these as a number, a date or a name:

• The matter the deposit funds, by name or number, and the initial deposit amount.
• The target balance the client keeps in trust for this matter, with a plain statement that it is a deposit, not an estimate of the total fee.
• The trigger and the deadline: after each bill is paid from trust, the client replenishes to the target within a stated number of days.
• How to pay: the payment link, the account for transfers, whether a card on file may be charged, and who confirms receipt.
• How the target can change: in writing, with notice, before a heavier phase such as trial preparation.
• What happens if the deposit is not replenished: the reminder steps, and the point at which the firm may seek to withdraw, as the firm’s attorneys word it.
• What happens at the end: the final bill is paid from trust and the unearned balance is refunded.

Collect the first deposit with the signature, not after it. A signed letter with an empty trust balance is a matter that starts on credit, which is the arrangement the evergreen clause was written to avoid.

What happens to the trust money at each bill, and when it goes back

Each month on an evergreen matter runs in the same order. The invoice goes to the client showing the work and that it will be paid from the deposit, with the replenishment request and its due date on the same page. The earned amount moves from trust to the operating account in the way the state’s rule allows, the matter’s ledger shows the balance left, and the replenishment goes back into trust on the same ledger.

Two rules pull in opposite directions here. Earned money has to leave: Florida’s Rule 5-1.1(f) says the firm’s portion “must be withdrawn within a reasonable time after it becomes due” unless the firm’s right to it is disputed. Unearned money has to stay: ABA Rule 1.15(c) allows withdrawal “only as fees are earned.” The comment to ABA Rule 1.15 adds that a lawyer “may not hold funds to coerce a client into accepting the lawyer’s contention”; a disputed portion stays in trust, and the undisputed portion is distributed promptly. What, if anything, the client must receive before a withdrawal is set by the firm’s own state rule.

The rules also say what has to be kept. Where Florida law applies, Rule 5-1.2 requires a ledger for each client or matter showing receipts, disbursements “and any unexpended balance,” a monthly reconciliation of every trust account against those ledgers, and, in a firm with more than one lawyer, a written plan naming who does the reconciliation. That per-matter ledger is also the report the billing team reads every week.

Unearned money goes back. ABA Rule 1.16(d) lists, among the steps on termination, “refunding any advance payment of fee or expense that has not been earned or incurred,” and the comment to Rule 1.5 says a lawyer “may require advance payment of a fee, but is obliged to return any unearned portion.” So the close-out gets its own date and owner: final bill, final withdrawal of earned fees, refund of the rest, ledger at zero. A balance left in trust on a closed matter is a refund owed, not the firm’s cash. If any part of a fee is called nonrefundable, ask the firm’s attorneys how its state treats it; Florida’s Rule 4-1.5(e)(1) requires such a fee to be confirmed in writing. Not legal advice.

How to set the replenishment amount from the matter’s monthly burn

The target balance is a number the firm can compute from the matter’s monthly burn: fees and expenses billed on that matter each month, from the time and billing reports. For a matter under way, average the last three months; for a new one, use the responsible attorney’s estimate of the next phase, written where billing can see it. Set the target at one month of burn plus the work done while a replenishment request is still open: if the client has ten days to replenish, that is about a month and a third. Before a heavier phase, such as trial preparation, reset the target in writing before the phase starts, not after the bill arrives.

Illustrative example: a hypothetical family-law matter billed $6,000, $9,000 and $7,500 over the last three months, an average of $7,500; with ten days to replenish, the target is set at $10,000, about a month and a third. The August bill of $7,000 is paid from trust, the balance drops to $3,000, enough for roughly the ten days of work while the request is open, and the request for $7,000 goes out with the invoice, due in ten days. The attorney expects trial preparation in November to run about $15,000, so the written notice resetting the target goes out in October. Replace every number with the firm’s own.

Then check it weekly. One list, run every Monday from the trust ledger by matter and the unbilled time report, one row per active hourly matter, by matter number, with no client names:

• Fee arrangement: evergreen, one-time deposit, payment plan, or flat fee.
• Target balance from the engagement letter, and today’s trust balance for the matter.
• Unbilled time and expenses, from the unbilled time or WIP report.
• Replenishment requested, date and amount; received, date and amount.
• For payment plans: next due date and installments missed.
• The named person who owns the follow-up, and the next action date.

Sort by unbilled time minus trust balance: a positive number is work done ahead of money held. Illustrative example: a hypothetical firm with 40 active hourly matters finds 6 evergreen matters below target with no request on record, 3 with a request older than 30 days, and 4 one-time deposits used up months ago with invoices aging behind them. Those 13 rows are three different conversations, each with a named owner by Friday. If the letter never set a target for a matter, that blank is the first finding.

When a payment plan fits better, and how to keep it from aging

A payment plan is the opposite trade: the client pays over time, and the firm does the work first. It fits a short or flat-fee matter, or a client with steady income who cannot fund a deposit. It does not fit a long hourly matter whose monthly burn is larger than the installment, because the balance owed then grows each month.

Payment plans also have a federal definition to check. Regulation Z, the Truth in Lending rule, calls a business a “creditor” when it “regularly extends consumer credit that is subject to a finance charge or is payable by written agreement in more than four installments (not including a down payment),” and counts “regularly” as more than 25 times in the preceding calendar year, or in the current one if the preceding year fell short (5 for credit secured by a dwelling). Consumer credit there means credit extended “primarily for personal, family, or household purposes.” Whether the firm’s plans fall inside that definition, and what follows if they do, is a question for its attorney before the plan template gets a fifth installment or an interest line.

A plan stays current only when it is run like a calendar:

• The schedule, with dates and amounts, signed with the engagement letter, and the first payment taken at signing.
• Automatic payment where the client agrees to it, by card or bank transfer, so each installment does not depend on a reminder.
• One named owner per plan, not the attorney on the matter.
• A missed-payment rule written in advance, for example a call within two business days, a written reminder at day seven and the attorney’s call at day fourteen; the exact days are the firm’s choice.
• A rule in the letter, worded by the firm’s attorneys, for what happens after a stated number of missed installments.

Cards are the other route: the firm is paid up front and the installments are owed to the card issuer. Florida’s Rule 4-1.5(h) says a firm “may accept payment under a credit plan,” and its comment says credit plans include credit cards. Other states set their own rules; ask the firm’s attorneys.

What to do when the client stops replenishing

A missed replenishment is a date, not a mood, and the firm’s response should be written down before the first one happens. For example, as an operations sequence, with the exact days set by the firm and every client-facing word approved by its attorneys:

• The day the replenishment is due and not received: the billing owner calls and emails, with the payment link.
• Day seven: a written reminder that quotes the clause from the engagement letter and states the amount and a new date.
• Day fourteen: the responsible attorney calls and asks what changed, whether a lost job, a question about the last bill, or a plan to change firms. Each has a different answer.
• Then a decision by the managing partner, recorded on the matter: a new date, a reset target, a payment plan for the gap, or a written warning that the firm will withdraw unless the obligation is met.

That last step is where the rules come in, and in litigation the court’s calendar decides how much room there is, so the warning belongs early, not the week before a hearing. What the rules allow, from the warning to a tribunal’s permission, is in the guide to a law firm client who stopped paying.

When this is not the fix, and where the Review fits

A contingent fee is not billed against a monthly deposit, so this guide does not fit a personal injury caseload on contingency. A practice built on flat fees has a different question, when each stage is earned. And a firm with a dozen hourly matters can run the weekly list above on one spreadsheet, recount in a month, and stop there; nothing needs to be bought.

For a firm at $1 million a year in fees or more, the Revenue Review covers retainers under the Quote → Contract hand-off, where the fee terms are set. From the firm’s letter templates, billing reports and trust balance reports by matter, exported de-identified wherever possible, it counts the rows of the list above: matters below target with no request, used-up deposits, missed installments, and closed matters still holding a balance. It never opens the trust account, never handles client funds and gives no legal or ethics advice. It takes two weeks, and the written report is the firm’s to keep.

If the retainer list turns out to be the gap, the next step is a free 20-minute call, where we say whether the spreadsheet above covers it, which may well be the honest answer. Below about $1 million a year in fees, the Review’s price does not fit, and the call says so.