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24 Jul 16

Can attorney fees be deducted from the settlement escrow?

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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.

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