When may an Illinois divorce lawyer use an advance payment retainer instead of a security retainer?

Plain-English summary

The opinion addresses two divorce-fee scenarios. In the first, a lawyer sets up an advance payment retainer for a spouse worried about having enough money to pay for the divorce, does not treat those funds as marital assets, and refunds the unused portion to the spouse after settlement. In the second, the spouse cannot pay, so a parent of the spouse funds an advance payment retainer (rather than giving money to the spouse, for fear it would be a marital gift), with unused funds returned to the parent. The lawyer asks whether the advance payment retainer is proper in each.

The opinion explains the Rule 1.15 framework. An advance payment retainer becomes the lawyer's property on payment and goes in the lawyer's general account (not trust), with any unearned portion refunded to the client; Rule 1.15 does not limit it to any particular type of proceeding. Rule 1.15 also recognizes the long-standing general (classic) retainer and the security retainer (held in trust and withdrawn as fees are earned), and distinguishes a fixed fee. Advance payment retainers were first recognized in Dowling v. Chicago Options Associates (2007). Critically, the rule provides that an advance payment retainer "may be used only when necessary to accomplish some purpose for the client that cannot be accomplished by using a security retainer," and the comments say it should be used "sparingly." The written agreement must use the term "advance payment retainer," state its special purpose and why it benefits the client, explain the general-account treatment, promise refund of any unearned portion, and tell the client of the option to use a security retainer.

The opinion declines to resolve the underlying substantive divorce-law questions (whether failing to count the retainer as a marital asset violates a discovery or divorce rule, or whether the parent's payment is a marital gift), as beyond the committee's scope. On the ethics question, it concludes both fee arrangements could have been handled with a security retainer, so the advance payment retainer was not justified in either case. In the first scenario the spouse could have given the same amount as a security retainer; there was no bankruptcy threat or other fact making the advance payment retainer advantageous, and the marital-asset question does not depend on the retainer type. The same reasoning applies in the second scenario: whether the parent's payment is a marital gift does not turn on the type of retainer, and in both retainer forms the lawyer uses the funds and returns any unused portion.

In practice

The opinion holds that under Rule 1.15 an advance payment retainer is available in any matter, including divorce, but only when a security retainer cannot accomplish the client's purpose, and that the comments direct it be used sparingly. It holds that in both divorce scenarios a security retainer would have worked, so the advance payment retainer was not justified, because the client's spendthrift concern, the use of the funds, the refund of any unused portion, and the marital-asset or marital-gift questions did not depend on which retainer form was used. The opinion expressly declines to decide the substantive divorce-law questions about marital assets and gifts.

Common questions

Q: When can an Illinois lawyer use an advance payment retainer?

A: Only when necessary to accomplish a purpose for the client that a security retainer cannot. The opinion stresses Rule 1.15's own limitation and the comments' direction to use it sparingly.

Q: Can an advance payment retainer be used in a divorce case?

A: Yes, in principle. The opinion notes Rule 1.15 does not limit advance payment retainers to any particular type of proceeding, but the security-retainer-first requirement still controls.

Q: Why were the two divorce retainers in this opinion not justified?

A: Because a security retainer would have accomplished the same purpose. The opinion concludes the client's concerns, the use and refund of funds, and the marital-asset and marital-gift questions did not depend on the type of retainer.

Q: What must the advance payment retainer agreement contain?

A: Under Rule 1.15(c) it must be a writing using the term "advance payment retainer," stating its special purpose and advantage to the client, the general-account treatment, the refund of any unearned portion, and the client's option to use a security retainer.

Background and rules framework

The opinion interprets Illinois Rule 1.15 (safekeeping property; Model Rule 1.15), which in Illinois defines and distinguishes the advance payment retainer, the general (classic) retainer, the security retainer, and the fixed fee, and limits advance payment retainers to situations a security retainer cannot serve. It relies on Dowling v. Chicago Options Associates, which first recognized the advance payment retainer in Illinois.

Citations and references

Rules of Professional Conduct:

• Illinois RPC 1.15 (safekeeping property; retainer types) / MR 1.15

Cases:

• Dowling v. Chicago Options Associates, Inc., 226 Ill. 2d 277, 875 N.E.2d 1012 (2007), recognizing the advance payment retainer

See also

• ISBA Ethics Op. 14-01: Credit Card Used to Fund a Security Retainer
• NY State Bar Op. 1202: Flat Fees, Advance Payments, and a Client-Satisfaction Discount
• NYC Bar Ethics Op. 2015-2: Nonrefundable Monthly Fee in a Retainer Agreement

Source

• Landing page: https://www.isba.org/ethics/opinions/1219