RPC 1.5, 1.16(d), 1.5(a), 1.5(a)(1)
Non-refundable fee arrangements for Medicaid clients
The inquiring lawyer practices elder law and frequently helps his clients ‘spend down’ their financial holdings to meet eligibility requirements for Medicaid benefits. One way to spend down financial holdings is to prepay funeral plan expenses. However, under the rules, prepaying funeral plan expenses will only qualify as a legitimate spend-down if the funeral plan is irrevocable. The lawyer wants to draft his attorney fee agreements so as to be irrevocable as an additional way to help the client spend down financial holdings.
The lawyer is aware of the problem with non-refundable attorney fees, but asks if there is any way that an irrevocable fee agreement could be drafted.
Attorney fee agreements may not be irrevocable. Such agreements would violate the requirements for fees in RPC 1.5 and the client’s right to refund of unearned fees upon the termination of the representation identified in RPC 1.16(d).
“A lawyer shall not make an agreement for, charge, or collect an unreasonable fee”. . . .See RPC 1.5(a). One of the factors in determining the reasonableness of the fee is the time and labor required. RPC 1.5(a)(1). A lawyer who expends a great deal of time working on a client’s case may reasonably charge a larger fee than one who spends only a short period of time working on the case. While lawyer and client might be able to anticipate the amount of time necessary for completion of the work as initially contemplated, the client may make some decision in the midst of the representation which reduces the amount of the lawyer’s work, the client may die, the lawyer may die or be disbarred, or the client may fire the lawyer. In each of these cases, fees already paid would have to be returned and/or the client obligations for future payments amended. RPC 1.16(d) and RPC 1.5, Comment 4.
What constitutes an irrevocable expenditure satisfying the Medicaid eligibility requirements is a legal question which this Committee may not answer. However, if the applicable regulations would prohibit adjustment of an agreed fee in light of the work actually done when the representation is ended, then the inquiring lawyer cannot enter into the kind of fee agreement he is proposing.