Transactions with clients: is financial assistance OK?

Under the Georgia Rules of Professional Conduct, Rule 1.8, certain kinds of transactions with clients are prohibited to lawyers. One of those, generally speaking, is providing financial assistance. As a lawyer, you need to be aware of what you can and cannot do, financially, for your clients. And as a client, you need to understand this as well.

Transactions with clients, the basic rule: don’t give or loan your client money

Medical care in Georgia, like everywhere in the United States, is expensive. Even if the client has insurance, there are co-pays and other uncovered costs. A serious personal injury can put the client out of work and interrupt their income. Many clients look to their lawyer for help with rent, food, travel expense, and other out of pockets. Some clients also believe they are entitled to have the lawyer pay their medical bills, provide a financial gift, or provide a loan. Complaining clients may even try to use financial gifts as leverage against the lawyer in a Bar grievance.

Rule 1.8(e) provides:

A lawyer shall not provide financial assistance to a client in connection with pending or contemplated litigation, except that:

1. a lawyer may advance court costs and expenses of litigation, the repayment of which may be contingent on the outcome of the matter; or

2. a lawyer representing a client unable to pay court costs and expenses of litigation may pay those costs and expenses on behalf of the client.

Comment 4 to Rule 1.8 explains:

Paragraph (e) eliminates the former requirement that the client remain ultimately liable for financial assistance provided by the lawyer. It further limits permitted assistance to court costs and expenses directly related to litigation. Accordingly, permitted expenses would include expenses of investigation, medical diagnostic work connected with the matter under litigation and treatment necessary for the diagnosis, and the costs of obtaining and presenting evidence. Permitted expenses would not include living expenses or medical expenses other than those listed above. (emphasis added)

So, generally speaking, a lawyer can advance costs related to the litigation of the client’s claims. The lawyer can also pay for medical diagnostics—for example, a consult with a physician about the client’s injuries. But not “living expenses” or other medical expenses.

The lawyer’s dilemma: altruism is against the Rules

But most lawyers get into the practice of law to help people. It’s tough to ignore a client who is in need. Can a lawyer simply give the client money for living expenses, or food, or whatever they need? Are gifts permissible transaction between lawyer and client? The lawyer’s answer should be “no.” Why? The main reason is, the lawyer should not put themselves into a potential conflict situation with their client.

If a client begins pestering you for money very early on in the relationship, that is a red flag. Is the client simply trying to take advantage of your good nature? Maybe, and let the lawyer beware! When a lawyer gives money to a client, it’s easy for the client to come back for more, and it’s harder for the lawyer to say no. This could cause other conflicts between lawyer and client to arise, derailing the case. (Similarly, as a client, if your lawyer can’t explain to you why they can’t give you money, that’s a red flag for you, too. It means they don’t know or understand the ethical rules.)

The safest and best course for both client and lawyer is not to get into that situation.

How can a lawyer help?

But what can the lawyer do to help their client? Find some alternative funding source, keep the representation clean, and do not add another layer of complexity to an already complex and dynamic situation. As a lawyer, you can direct them to other financial resources. For example, you could direct them to a funding company to cover short term needs. You could also direct them to credit counselors who help with budgeting or other issues. The bottom line is, it’s not a good idea to give money to a client, for lawyer or client.