Answer: Fees paid in advance of services being performed by a lawyer or LLP are generally* considered the property of the client and must be held in a COLTAF or individual trust account until earned. Special considerations apply when the fee is a flat fee.

Explanation: Fees paid in advance of services must generally be held in a trust account and transferred to the firm’s operating account as earned–this applies to flat fees. However, portions of the flat fee may be considered earned at milestones in the matter. When a flat fee is charged, the terms of the fee must be communicated in writing before or within a reasonable time after commencing representation. The written terms of a flat fee must include information about whether any portion of the flat fee will be considered earned upon the completion of specific tasks or the occurrence of specific events. A form for flat fees is included in Colorado Rule of Professional Conduct 1.5 and Colorado Licensed Legal Paraprofessional Rule of Professional Conduct 1.5. Be sure to read the full rule and comments for additional context on when a flat fee may be considered earned.

Example 1: In a criminal defense matter, a lawyer and client may agree that the lawyer earns portions of the flat fee upon the lawyer’s entry of appearance, initial advisement, review of discovery, preliminary hearing, pretrial conference, disposition hearing, motions hearing, trial, and sentencing.

Example 2: In a trusts and estates matter, a lawyer and client may agree that the lawyer earns portions of the flat fee upon client consultation, legal research, completing the initial draft of testamentary documents, further client consultation, and completing the final documents.

*”Engagement retainer fees” are an exception to this rule. See Colorado Rule of Professional Conduct 1.5, Comment 16, for more information on the treatment of engagement retainer fees.