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Can attorney fees be deducted from the settlement escrow?

July 24, 2016 Our Blog

Escrow accounts are used to help resolve disputes and make distributing money from settlements or divorces easier. The account is usually a trust set up by your attorney. The money in escrow can be used to pay off attorney fees although a number of restrictions apply. Here is what you need to know about deducting attorney fees from the settlement escrow.

Take a Look at Your Fee Agreement

If you want to know whether your attorney can take fees out of a settlement escrow account, then you must look at your fee agreement. The fee agreement is in the contract that you signed when first retaining your lawyer. The agreement might state whether fees will be drawn from the escrow account at the end of the case. Many lawyers actually use a pay-as-you-go billing method that does not involve escrow. If there is no mention of an escrow account, then you should not expect your lawyer to touch the money in most cases.

An Attorney Needs Permission

The reality is that an attorney needs some type of permission to access the money in a settlement escrow account. That permission could be given in your initial retainer agreement as a written fee arrangement. You might decide to give your lawyer permission to withdrawal the money later in order to avoid paying out-of-pocket for all legal expenses during a long case. There are also some rare situations where the court could give the lawyer permission. If your attorney does not have express permission to deduct fees from escrow, then it should not happen.

How to Protect Escrow Accounts

There might be times when you do not fully trust your lawyer with a settlement escrow account. This could be because of strange or unethical behavior while representing you. It could be due to a dispute that is emerging over payments and fees. These are the rare situations where you might need to protect the money in escrow. You can do this by pleading your case to your local State Bar Association. The association can put a lien on the escrow account until matters are resolved or investigated. That will prevent your attorney from withdrawing fees from the settlement escrow.

Court Orders and Payments

There are rare circumstances where an attorney might be able to get permission from a court to take out fees from a settlement escrow account without your consent. Your attorney might be able to get the court to order that payments and fees be drawn from the escrow account. Your lawyer will have to provide a good reason as to why this needs to be done. The primary reason this could occur is due to non-payment. This means your lawyer has received little to no payment for the services rendered while retained by you.

Filing Grievances

Although the vast majority of attorneys today are ethical, honest and professional, some are not. An attorney might attempt to use a settlement escrow account to pay for fees and expenses that you never agreed to. The attorney might attempt to seize all the money in the escrow account. If you believe that your attorney acted unethically with the money in escrow, then you can file a grievance with the State Bar. That grievance could lead to an investigation, a lawsuit or even disbarment. It also might be able to get you back any money that was taken improperly.

This guest blog post was written by Edmond El Dabe, a premier group of Los Angeles Personal Injury Lawyers, with over 30 years of legal experience.

Here’s an article from Steve Raiser – an NYC personal injury lawyer. The financial aspect of any divorce is often one of the most difficult aspects. Some spouses have no idea where they are financially if their spouse has always been in charge of the finances. Some spouses stay home with the kids and don’t contribute to the household income, and they’re not sure how they can care for themselves following a divorce. In fact, some people stay with their spouse in an unhappy marriage for no other reason than they aren’t sure how they can financially support themselves if they were to divorce.

In some cases, a settlement escrow is created for a couple while they’re going through their divorce. This escrow account contains money that’s used for various situations. It takes some time for a judge to get through the financial aspects of your divorce to fairly and justly divide things like assets and debts to both parties. While this occurs, a settlement escrow is created. The money in the escrow account is used for various reasons, and it can be used to pay your attorney. However, the rules and stipulations surrounding this kind of escrow payment are strict.

Your Attorney Can’t Touch the Money

The misconception people have about settlement escrow accounts is that their attorney set it up. This gives him or her the right to take their fees from the account, right? Wrong; your attorney has no right or legal ability to touch this account even if he or she is the one who created it and set it up for you. This account is strictly enforced by the court, and your attorney has no legal right to any of the money in the account.

If you want to pay your attorney fees from this account, it’s not difficult. You must provide written permission to your attorney to withdraw his or her retainer and fees from the account. It’s usually a simple task, and both parties must agree to it. In the uncommon situation that you or your spouse decide you don’t want to pay your attorney through this account or even at all, the judge in your divorce case might decide to allow your attorney the permission needed to go into the account and get their fee out.

For this to happen, your attorney must file a petition with the court for payment. It’s unlikely it will come to this if you are paying the attorney the fees he or she asked you to agree to in writing when you hired the firm to stand for your divorce. There might, however, be a time when you feel your attorney did not do his or her job ethically, with good morals, or even correctly.

If you dispute the job your attorney did, you might decide you’re not paying the fees he or she asked for when you signed a contract. You might decide to take this up with the attorney’s office and fight for your own rights, but they can still file paperwork with the court to get this money from your account. What you can do in a situation like this is explain to the judge why you’re not paying. The judge will take into consideration your story, the story the attorney tells, and then grant or deny permission based on this information.

If you want to pay your attorney from this account, you have the right to do so. There might be some instances in which you have to run it through the court before you do it, but it’s within your rights to grant your attorney permission to do this without much issue. Call your attorney to discuss this situation and find out what you must do to make it happen. You have to pay your attorney, and the settlement escrow account is a good place to start making payments.



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