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 Iowa, as in many other jurisdictions, an advance payment or retainer fee paid by a client to an attorney is considered to remain the client's property until the attorney has actually earned it by performing legal services. Consequently, such funds must be deposited into a separate trust or escrow account, not the attorney's personal or operating account, to avoid commingling client funds with the attorney's own money. This is in accordance with the Iowa Rules of Professional Conduct which mandate that attorneys safeguard client property. 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 to the client. The specific terms of the refund may be governed by the engagement letter or agreement, which outlines the terms of the attorney's services and fee arrangements. Clients are encouraged to thoroughly review and understand these terms before entering into an agreement with an attorney.