A fee deposit or advance payment from a client to an attorney for services to be performed in the future remains the property of the client until it is earned by the attorney. Such an unearned fee deposit generally must be held in the attorney’s trust or escrow account and not deposited into the attorney’s operating account or otherwise accessed until the attorney has done the work and earned the fee.
If the client or the attorney terminates the representation at any time, the attorney generally must return the unearned portion of the fee to the client. The terms of the engagement letter or agreement between the attorney and client may impact the attorney's obligation to return unearned fees, and a potential client should read and understand it.
In Texas, when a client provides an attorney with a fee deposit or advance payment for legal services that will be performed in the future, this money is considered to remain the client's property until the attorney has actually earned it by providing the agreed-upon services. Consequently, such unearned fees must be kept in a separate trust or escrow account, as mandated by the Texas State Bar rules. The attorney is not allowed to deposit these funds into their own operating account or use them in any way before the services are rendered. If the attorney-client relationship is terminated before the attorney has fully earned the fee, the attorney is typically required to refund the unearned portion of the fee to the client. However, the specific terms of the engagement letter or agreement between the attorney and the client can affect the attorney's obligation to return unearned fees. Therefore, it is crucial for clients to thoroughly read and understand the terms of any engagement letter or agreement before entering into a relationship with an attorney.
