How To Hire A Lawyer

Legal fees are a cost of doing business. While the Web has made it easy to do some of the very mundane work on your own (say, filing for incorporation or ginning up a bare-bones operating contract), do-it-yourself lawyering has huge limitations.

The trick is finding and hiring the best, most trustworthy professional help for the buck. I'm going to help you.

First, start with your inner circle: friends, neighbors and colleagues. This initial search may not turn up any attorneys with the specific expertise you need, but don't despair. While your sister's divorce lawyer may not be much help when it comes to selling your business, he may know a few attorneys perfect for the job. Lawyers know other lawyers--use them for recommendations.

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Don't want people to know you need legal help? You can hunt on the sly by contacting local bar associations. They have lists of attorneys. Beware, though: The bar association hasn't blessed those attorneys, beyond perhaps assuring they are licensed to practice and have not been disbarred. Further due diligence is still required.

Next step: Hit the Web. To be fair, there are still a few accurate rating systems for lawyers. One useful online resource is martindale.com, which rates lawyers on a scale of A, B and C. Those ratings are done by other lawyers and are fairly reliable. Martindale also offers additional information on attorneys, but be aware that the attorneys themselves prepare those write-ups. Lawyers.com and findlaw.com can help too, but understand that attorneys pay to be listed there.

Once you assemble a short list, remember that size matters. Law firms range in size from one lawyer to over 3,000. If you are Gordon Gekko and want to do a hostile takeover of Bluestar, think big firm. If you are looking for someone to negotiate a lease for your new office, a small shop will be able to handle that as well, if not better. (After all, you don't want a marquee firm letting its younger, more inexperienced staffers learn on your dime.) Remember that letters to legal opponents from big shops tend to carry more weight.

Next step: At this point you're ready to set up an initial consultation. But before you pick up the phone, do even more homework. Check each attorney's Web site. Does it look cheap or professional? Is there a lot of sizzle but little substance? Next, check their track records---as in how they fared in specific decisions. While subscriptions services, such as Westlaw, Lexis or PACER, are happy to sell you this information, your local law library can probably get it for a lot less.

At your first meeting, be ready to ask a lot of questionsregarding both your particular matter and the lawyer's practice. Some good ones: How many similar matters have you handled? What were the results of those cases? Which lawyer in the firm will be working on your case? Will there be any limitations on the scope of the representation? How will you be kept informed about the progress of the case? How quickly do you respond to phone calls and e-mails? How can I reach you after normal business hours?

The lawyer may charge you for the initial consultation. Don't take this as an affront. Many potential clients use these get-to-know-you sessions to get free legal advice. (If you owned a grocery store, you wouldn't let someone try a brand of paper towels to see how they work and then, maybe, pay for them.) If the attorney does charge, simply ask if the amount will be credited to the bill later on.

Which brings me to fees. Whatever you do, understand precisely how you will be charged--this will save you all sorts of headaches later on.

Lawyers generally charge one of three ways: by the hour, a one-time flat fee or by contingency (percentage of the amounts recovered). Not every fee structure is permitted for every legal situation. For personal injury cases, most lawyers charge a contingency fee; for certain business transactions (such as incorporation), they'll charge a flat fee; and for most other matters, they will ring up by the hour.

Hourly rates can range from $100 to $1,000. (Generally speaking, you get what you pay for.) Bear in mind, too, that an attorney who charges $200 per hour may take twice as long to do the same thing as an attorney who charges $300 per hour.

There are additional questions you should ask, depending on the type of fee structure. Example: If the engagement is on an hourly fee basis, you will want to know (1) the hourly rate, (2) the minimum billing increments, (3) whether there is a charge for every phone call, letter and e-mail, (4) an estimate of the number of hours the case will take (I find this question very difficult to answer), (5) what expenses might be required and (6) what happens if the case takes longer than anticipated. (Many of those same questions are relevant in flat-fee agreements too.)

If yours is contingency arrangement, you will want to know (1) the likelihood of recovery (remember, there are no guarantees in the law), (2) an estimate of the recovery (same warning), (3) the percentage being charged, (4) the percentage most lawyers charge for the same type of case, (5) anticipated expenses and (6) what happens if the case settles immediately.

Get a handle on all of that and you'll be ready to ink an engagement letter. This is your working contract between you and your attorney, so read it carefully. The engagement letter should describe the nature of your legal matter, as well as all of the terms and conditions of the relationship, including the hourly rate, the minimum billable increment (you should always insist on being billed in six-minute increments, not 15), the expenses you will be responsible for, the amount of the retainer and any other matters you agreed to.

If you are unsure about something in the engagement letter, call and ask. Otherwise, if you sign and return the letter, you will be bound by it.

The work doesn't end after you ink that contract, of course. Ask your lawyer to provide you with copies of everything that goes out relating to your case (the cost of the copies will most likely be passed on to you). I find that providing too much information is better than not providing enough.

Think your attorney missed his calling as a golf caddy? Fire him. After all, you control the relationship.

If you owe money, your lawyer may insist on being paid before turning over your file to you or his replacement--whether or not he can actually make those demands is determined by the ethics laws in your state. (The state bar association can field that and related questions.) And don't think you are at a disadvantage because lawyers run the bar associations--attorneys do a good job of policing themselves.

Happy hunting.

What Is a Structured Settlement?

What Is a Structured Settlement?

Sometimes when a plaintiff settles a case for a large sum of money, the defendant, the plaintiff's attorney, or a financial planner consulted in association with the settlement, will propose paying the settlement in installments over time rather than in a single lump sum. When a settlement is paid in this manner it is called a "structured settlement". Often the structured settlement will be created through the purchase of one or more annuities, which guarantee the future payments.

A structured settlement can provide for payment in pretty much any schedule the parties choose. For example, the settlement may be paid in annual installments over a number of years, or it may be paid in periodic lump sums every few years.

Benefits of a Structured Settlement

One significant advantage of a structured settlement is tax avoidance. With appropriate set-up, a structured settlement may significantly reduce the plaintiff's tax obligations as a result of the settlement, and may in some cases be tax-free.

A structured settlement can protect a plaintiff from having settlement funds dissipated, when they are necessary to pay for future care or needs. Sometimes a structured settlement can help protect a plaintiff from himself - some people simply aren't good with money, or can't say no to relatives who want to "share the wealth", and even a large settlement can be rapidly exhausted. Minors may benefit from a structured settlement as well, such as a settlement which provides for certain costs during their youth, an additional disbursement to pay for college or other educational expenses, and then one or more disbursements in adulthood. An injured person who has long-term special needs may benefit from having periodic lump sums with which to purchase medical equipment or modified vehicles.

In some situations, it will be better for a severely disabled plaintiff to set up a special needs trust, rather than entering into a lump sum or structured settlement. Any plaintiff who is receiving, or expects to receive, Medicaid or other public assistance, or the guardian or conservator entering into a settlement on behalf of a disabled ward, should consult with a disabilities financial planner about their situation before choosing any particular settlement option or structure.

Potential Disadvantages of Structured Settlements

Some people who enter into structured settlements feel trapped by the periodic payments. They may wish to purchase a new home, or other expensive item, yet be unable to muster the resources because they can't borrow against future payments under their settlement.

Some people will do better by accepting a lump sum settlement, and investing it themselves. Many standard investments will give a greater long-term return than the annuities used in structured settlements.

Selling a Structured Settlement

If you have a structured settlement, you may have been approached by a company interested in purchasing your settlement, or may be curious about selling your settlement in return for a lump sum buyout. About two thirds of states have enacted laws which restict the sale of structured settlements, and tax-free structured settlements are also subject to federal restrictions on their sale to a third party. Also, some insurance companies will not assign or transfer annuities to third parties, to discourage the sale of structured settlements. As a consequence, depending upon where you live and the terms of your annuities, it may not be possible for you to sell your settlement.

Keep in mind that companies which buy structured settlements intend to profit from their purchase, and sometimes their offers may seem quite low. You may benefit from approaching more than one company in relation to the sale of your settlement, to make sure that you obtain the highest payoff. You also want to be sure that the company which wants to buy your settlement is established, well-funded, and reputable - you don't want a fly-by-night outfit to obtain the rights to your annuities but to disappear or go bankrupt before paying you the buyout money. You may have to go to court to get a judge to approve the buyout. It is usually a good idea to consult with a lawyer before entering into an agreement to sell your settlement.

Special Considerations

Any person entering into a structured settlement should be on guard for potential exploitation in relation to the settlement:

Excessive Commissions - Annuities can be highly profitable for insurance companies, and they often carry very large commissions. It is important to ensure that the commissions charged in setting up a structured settlement don't consume an inappropriate percentage of its principal.

Overstated Value - Sometimes, after negotiating a particular settlement figure, the defense will overstate the value of a structured settlement. As a result the plaintiff, in accepting the settlement, in fact obtains a significantly lower dollar value than was agreed upon. Some defendants have nominally paid the full amount of the settlement, knowing that they would later obtain significant rebates from the annuity companies they used. Plaintiffs should consider compariing the fees and commissions charged for similar settlement packages by a variety of insurance companies, to make sure that they are in fact getting full value. A plaintiff may wish to make it a condition of the settlement that the defendant will actually pay the full value of the settlement in setting up the structured settlement, and that any rebates received by the defendant for annuities included in the settlement be payable to the plaintiff.

Self-Dealing - There have been cases where the plaintiff's lawyer is also in the insurance business, and sets up a structured settlement on behalf of a client without disclosing that the attorney is purchasing the annuities from his own business, or is pocketing a large commission on the annuities. Similarly, there have been situations where the plaintiff's attorney has referred the client to a particular financial planner to set up a structured settlement, without disclosing that the financial planner will be paying the attorney a referral fee in relation to the client's account. Make sure that you know what financial interest, if any, your lawyer has in relation to any financial services sold or recommended by the lawyer.

Life Expectancy - It is unfortunate, but many people who receive large personal injury or workers' compensation settlements will have a shortened life expectancy as a result of their injuries. It is important to consider life expectancy in association with any structured settlement, and to consider whether it is appropriate to enter into an annuity where payments will cease upon death. Sometimes it will make sense to insist upon an annuity that pays a minimum number of payments, or one that will pay a balance into the plaintiff's estate, such that the value of the settlement is not lost to an insurance company upon the plaintiff's untimely death.

Using Multiple Insurance Companies - For larger settlements, it often makes sense to purchase annuities for a structured settlement from several different companies, dividing the settlement between those companies. This can provide you with protection in the event that a company that issued annuities for your settlement package goes into bankruptcy - even in the event that one of the companies defaults in part or in full on your settlement payments, you would still receive full payment from the other companies.