Michigan lawyers split over when earned fees can leave trust, and whether a retainer can be nonrefundable.

Michigan lawyers disagree over when earned fees may leave trust

Michigan's proposed rewrite of Rule 1.15 would change when lawyers can move earned fees out of a client trust account. It would also address whether a lawyer and client can agree that an advance fee is nonrefundable and earned on receipt.

The proposal is pending in Michigan Supreme Court ADM File No. 2022-19. The sources the desk reviewed show no order adopting it.

The State Bar of Michigan's Representative Assembly voted overwhelmingly in April 2022 to propose amendments to Rules 1.15 and 1.15A. The Bar's Professional Ethics Committee had recommended them unanimously. The Bar said the existing rules are “confusing, vague” and do not give lawyers adequate guidance. Its Ethics Helpline frequently hears from lawyers struggling with the rules.

The Supreme Court republished a revised version by order dated November 6, 2024. The order proposed amendments to Rules 1.15 and 1.15A and new Rules 1.15B and 1.15C. It asked for comment especially on revised subrule 1.15(c) and its accompanying comment, which address legal fees and expenses paid in advance.

The proposal would tie fee withdrawals to billing and a dispute period

Under proposed Rule 1.15(c), unearned legal fees and funds paid in advance for expenses would go into a client trust account. The lawyer could withdraw them only as fees were earned or expenses were incurred.

The lawyer's own funds would have to be withdrawn from trust within a reasonable time after three events: the fee was earned, the client was billed, and a reasonable time to dispute the bill had passed. The client could also agree to payment from the trust funds.

The proposed text uses “reasonable time.” It sets no fixed number of days.

The proposal also would allow an advance fee agreement to provide that portions of the fee become earned through the passage of time, completion of certain tasks, or another basis agreed upon by the lawyer and client.

A separate provision would allow a lawyer and client to agree in an unambiguous writing that a retainer or advance fee is nonrefundable and earned on receipt. If that language remains in the proposal, the lawyer could deposit the payment in the operating account instead of trust. Before accepting the payment, the lawyer would have to give the client a document setting out the fee.

The November 6 order said publication did not mean the Court would issue an order or suggest probable adoption.

Small firms objected to any required waiting period

At the May 21, 2025 public hearing, Shelley Kester, owner of a statewide family law firm, said any required waiting period would be unnecessary and impractical.

Kester said fee agreements already establish billing schedules. Those schedules may be weekly, twice monthly, monthly, quarterly, or at the conclusion of a matter. A fixed or uniform waiting period, she said, would override those negotiated agreements.

She also said delayed access to earned fees would affect cash flow and overhead for small firms and solo practitioners. It could force them to raise retainers or rates, or decline cases. The rule, she said, should respond to demonstrated breaches of trust rather than presume them.

Kester said her own firm holds funds for a short period so clients can review an invoice before the transfer. She opposed a required period. She referred to a May 2 letter written by appellate attorney Liisa Speaker and joined by members of the Family Law Section.

Speaker said many solo practitioners had privately told her the wording could destroy their ability to practice. She gave the Court a payroll example. A firm that files a brief on Thursday and funds payroll the following Tuesday may need to invoice and move earned funds by Friday.

Speaker described the issue as one involving access to justice. She said the rule could limit payment plans and cause firms to become more selective about cases. Her firm could probably wait a few days if the Court required, for example, a three-day period. But she said the larger problem was retainers that do not cover all the work.

Elizabeth Parker, an appellate attorney at Speaker's firm and a former solo practitioner, said the proposal would create an administrative and financial burden for small and solo firms.

Justice Elizabeth Welch asked whether the phrase “a reasonable time” would solve the problem. She acknowledged that reasonableness depends on the circumstances and said she wanted to hear from the people affected.

Much of the hearing debate centered on the dispute window

While reading the full May 21, 2025 hearing transcript and the November 6, 2024 order side by side, the editors noticed that the proposed text contains no fixed number of days. Much of the hearing debate was about whether any dispute window should exist at all, not about how long it should be.

The distinction matters for firms that invoice on a schedule tied to payroll, overhead, or negotiated client arrangements. If adopted, the proposal would make the timing of a withdrawal depend on the fee being earned, the client receiving a bill, and a reasonable time passing for a dispute, unless the client agreed to payment from trust.

The State Bar asked the Court to remove nonrefundable-fee language

The State Bar's Executive Committee voted unanimously in a February 27, 2025 letter to support the republished proposal with two amendments.

One would add a comment on safekeeping digital property. The other would strike the proposed references to nonrefundable fees from Rule 1.15 and its “Fees Paid in Advance” comment.

The Bar said its Ethics Committee deliberately left nonrefundable fees out of the original 2022 proposal. Whether those fees are ethically permissible, and what safeguards they require, “elicits divergent opinions across the legal profession.” The Bar asked that the issue be handled in a separate administrative file so affected lawyers and the public would receive proper notice.

The Bar also raised whether informed consent should be required, as it is under Rule 1.19. Its Board of Commissioners had unanimously supported the original 2022 version.

John Allen took the other side at the May 21 hearing. He supported revised Rule 1.15(c), saying an unambiguous writing would protect both clients and lawyers. He said the revision would permit classic retainers, meaning fees paid to make a lawyer available rather than to pay for performance of services.

Allen argued that fees earned on receipt belong in the lawyer's operating account and that putting them in trust would be improper. He also said comments to a rule are not the law, and that anyone seeking to change Rule 1.5 on fees should file a separate proposal. He said a flat fee paid in advance should be permitted.

The published rules still show the older structure

The editors also checked Michigan's published Rules of Professional Conduct compilation, marked “Updated with MSC order(s) effective on 1/1/2026,” to see whether any version had been adopted.

That compilation still shows Rule 1.15 with the old structure. Subrule (a) contains definitions, subrule (b) contains a “lawyer shall” list, and the compilation lists Rule 1.15A but not Rules 1.15B or 1.15C.

Until the Court acts, the existing rule text governs. Before relying on either the proposed language or the older rule, check the Michigan Supreme Court's administrative files page for ADM File No. 2022-19.

Firms should preserve the fee record before taking advance payments

If the proposal is adopted, an advance fee for legal services or expenses would go into trust unless the fee was earned under the agreement. Earned fees would come out only after billing and a reasonable opportunity to dispute the bill, unless the client agreed to payment from trust.

A firm seeking to keep a nonrefundable retainer outside trust would need an unambiguous written agreement and a separate document setting out the fee before accepting payment, if the nonrefundable language survives.

Archivar is an operating system for a law firm that answers every call 24/7 in English and Spanish, runs intake, manages matters, and remembers everything the firm does. The fee terms shown to a client at intake and the date they were shown sit in the same record as the matter, which is the kind of paper trail a document given before payment would require.

For now, do not treat the proposed language as effective. Check ADM File No. 2022-19, keep the existing Rule 1.15 controls in place, and preserve the fee terms and delivery date in the matter record before accepting an advance payment.