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The Difference Between Attorney’s Fees and Costs

If you ever hire a lawyer, you will be asked to sign an engagement agreement that sets forth the attorneys’ fees and costs you will be required to pay. But what’s the difference between fees and costs?

Simply put, fees refer to the money you pay to a lawyer for their time working on your case. If you hire your lawyer on an hourly basis, then the attorneys’ fees would be the hourly rate your lawyer charges. If the lawyer charges $600 per hour, that’s the attorneys’ fees part.

If you hire your lawyer on a contingency fee basis, where the lawyer receives a percentage of any recovery, then the fees will be the lawyers contingency fee percentage. Most contingency fees are around 40%. So if your lawyer recovers $100,000 for you, then the fees will be 40% of $100,000; or $40,000.

Costs, on the other hand, are all of the out-of-pocket expenses your lawyer pays to prosecute your case. For example, when you file your lawsuit in court, the court wants you to pay a fee for each party appearing in the action. If you and your brother are both suing to overturn a Trust, then you would need to pay two filing fees, which can be around $500 per person.

Costs are also incurred for taking depositions (where you must hire a court reporter to record the deposition), making copies of documents, hiring expert witnesses, any bill paid to an outside party is a cost of your case.

Clients are usually expected to reimburse the lawyer for all hard costs the lawyer pays on your case. That may vary with contingency fee agreements, where costs are only reimbursed if the lawyer is successful in recovering money for you. But in any event, the costs will be paid by someone throughout the life of your case.

To recap: fees are the amount paid for the attorneys’ time and effort working on your case, costs are the amount paid for out-of-pocket expenses on your case. Every case will have both fees and costs. Be sure you understand the difference. Also, be sure you understand who is responsible for paying the costs and when they are likely to be paid.