ABA Model Rule 1.8(e) and Pre-Settlement Funding: Attorney Guide (2026)

Why This Rule Matters

ABA Model Rule 1.8(e) governs whether — and how — an attorney representing a plaintiff can provide (or facilitate) financial assistance to that client while the case is pending. For pre-settlement funding specifically, the rule shapes what an attorney can say to a client about a funding company, what fees or referrals are permissible, and what disclosures are required. The 2020 amendment adding the "humanitarian exception" was one of the most significant updates to Rule 1.8 in decades — but its reach is narrow, and many attorneys either overread or underread the change.

This guide is written for lawyers, paralegals, and firm administrators who need a working understanding of the current framework. It is not a substitute for state-bar-specific compliance advice. Every state has its own version of the rule (and its own interpretations); the ABA Model is a starting point, not the final word.

The Text of the Rule (as amended August 2020)

Model Rule 1.8(e) reads, in relevant part: "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; (2) a lawyer representing an indigent client pro bono, a lawyer representing an indigent client pro bono through a nonprofit legal services or public interest organization, and a lawyer representing an indigent client pro bono through a law school clinical or pro bono program may provide modest gifts to the client for food, rent, transportation, medicine and other basic living expenses. The lawyer: (i) may not promise, assure or imply the availability of such gifts prior to retention or as an inducement to continue the client-lawyer relationship after retention; (ii) may not seek or accept reimbursement from the client, a relative of the client or anyone affiliated with the client; and (iii) may not publicize or advertise a willingness to provide such gifts to prospective clients."

Each of the operative words in that text has been litigated somewhere. The compliance work sits in the definitions.

Category 1: Court Costs and Litigation Expenses

Rule 1.8(e)(1) permits the traditional contingent-cost advance. Filing fees, deposition costs, expert-witness fees, medical records, exhibit preparation, mediation costs, and similar case-generation expenses can be advanced by the lawyer and reimbursed at settlement or judgment. Most personal-injury retainer agreements memorialize this.

What is not covered: living expenses, medical treatment fees paid to providers who are not litigation experts, rent, utilities, groceries. These are personal expenses of the client, not litigation costs.

Category 2: The 2020 Humanitarian Exception

The August 2020 amendment added the "modest gifts" language to Rule 1.8(e). This provision is narrower than many practitioners realize. It applies only when:

• The lawyer is representing an indigent client;
• The representation is pro bono — the lawyer expects no fee from the client;
• The pro bono representation is either individual, or through a legal-services nonprofit, or through a law-school clinical program;
• The financial assistance is a gift — no repayment expected;
• The assistance is for basic living expenses (food, rent, transportation, medicine);
• The lawyer did not promise, imply, or use the gift to secure or continue the representation;
• The lawyer does not publicize or advertise a willingness to provide such gifts.

The humanitarian exception is not a general permission for contingency-fee lawyers to give money to their working plaintiff clients. It is specifically for indigent pro bono cases. A firm handling a $200,000 auto case on contingency cannot use Rule 1.8(e)(2) to send its client rent money — that client is not indigent-pro-bono, and the firm has a fee interest in the case.

State Adoption of the 2020 Amendment

State adoption of the humanitarian-exception amendment has been uneven. Roughly half of U.S. states have incorporated the amendment into their own rules of professional conduct as of early 2026; others are still considering it; a handful have declined. Practitioners should verify their specific state's rule text and any comments before relying on the exception. See our companion piece on the 50-state bar ethics matrix for a state-by-state summary.

Third-Party Pre-Settlement Funding and Rule 1.8(e)

The most common attorney interaction with financial assistance is not through the humanitarian exception but through third-party pre-settlement funding. Non-recourse funding from an independent funder to the plaintiff sits outside Rule 1.8(e) entirely — because the lawyer is not providing the financial assistance. However, the interaction still touches on ethical duties:

Referral vs. mere information

An attorney may inform a client about the existence of pre-settlement funding. Whether an attorney may refer a client to a specific funder — and what the ethical implications are — varies by state. Some state bars require the attorney to provide a list of options rather than a single referral. Others allow a specific referral subject to standard conflict-of-interest analysis.

No fee sharing with the funder

The attorney may not accept a referral fee, commission, or kickback from a funding company for directing plaintiffs to it. This is a near-universal rule across state ethics opinions and is one of the clearest lines in the framework. Reputable funders do not offer such payments; if a funder offers a "co-marketing" or "referral" arrangement, that is a red flag for both the attorney and the plaintiff.

Client's independent decision

The decision to accept funding rests with the client. The attorney's role is to review the funding contract, acknowledge the assignment (which every reputable funder requires), and confirm the mechanics with the client. The attorney is not a party to the funding contract and does not guarantee or advocate for the funding.

Duty of communication

Rule 1.4 requires the attorney to keep the client reasonably informed. If a client is considering funding, the attorney's duty is to communicate the mechanics honestly: what the advance will cost at settlement, how it will be paid from the distribution, what the effective rate is, and what alternatives exist. See our companion piece on how to introduce funding to reluctant clients for a working script.

Common Ethical Pitfalls

Guaranteeing repayment

An attorney may not guarantee to the funder that the case will produce enough to repay the advance. Guarantees convert non-recourse into recourse and re-implicate Rule 1.8(e)'s prohibition on attorney financial assistance. Standard funder contracts include attorney acknowledgment language that specifically disclaims any guarantee — read it before signing.

Concealing the assignment

Once the assignment is executed, the attorney must honor it at disbursement. Failing to pay a valid non-recourse assignment at settlement can expose the attorney to breach-of-contract or unjust-enrichment claims and, in serious cases, ethics complaints for handling client property (Rule 1.15).

Using funding as a client-retention tool

An attorney may not condition representation on the client obtaining funding, nor use the availability of funding as an inducement to sign up a client. The choice must be the client's, independent of the retention decision.

Advising in the funder's interest

The attorney's fiduciary duty runs to the client, not to the funder. If a funder's proposed terms are not in the client's interest — because rates are unusually high, the cap is missing, or the disclosure is inadequate — the attorney should say so plainly to the client.

What About Client Loans From the Firm?

Attorneys occasionally consider making direct loans to clients for living expenses during a case. Outside the narrow humanitarian exception, this is prohibited by Rule 1.8(e). The prohibition exists because such loans create a fee interest in the litigation that is separate from the contingent fee — and because they can compromise the lawyer's independence. Referring the client to an arm's-length, non-recourse third-party funder resolves the issue without the ethics conflict.

Practical Compliance Checklist for Firms

1. Confirm your state has adopted (or has an analogous provision to) Rule 1.8(e) as amended in 2020, and know the state-specific text.
2. Do not advertise or promise any form of humanitarian gift to prospective clients.
3. If a client asks about funding, provide neutral information about the option — never a hard sell.
4. Never accept a fee, commission, or other benefit from a funder for a referral.
5. Review every funding contract before your client signs. Confirm non-recourse language, cap, and total repayment schedule.
6. Acknowledge the assignment in writing when required by the funder.
7. Never guarantee repayment or represent to the funder that a specific outcome is assured.
8. Honor the assignment at disbursement; do not attempt to renegotiate the payoff after settlement without funder consent.
9. Document your communication with the client about the funding decision.
10. If the funding contract has terms you consider unfair to the client, tell the client. That advice is part of your Rule 1.4 duty.

For a broader look at the legal-funding landscape and how it interacts with attorney practice, see our companion pieces on how pre-settlement funding actually works and on the state-by-state legality of pre-settlement funding. For lien mechanics that affect distribution at settlement, see funding and medical liens.

The Bottom Line

Model Rule 1.8(e) draws a clear line: attorneys do not provide financial assistance to their working clients outside of narrow, well-defined exceptions. The 2020 humanitarian amendment did not change the general framework for contingency-fee practice — it created a narrow humanitarian permission for indigent pro bono representation. For everyone else, third-party non-recourse funding is the compliant path forward. The attorney's role is to be an honest advisor about the mechanics, an accurate reviewer of the contract, and — at disbursement — a reliable payer of the valid assignment. Do those three things and Rule 1.8(e) is a workable framework rather than an obstacle.

Firms looking for a funder that treats the attorney relationship with the same care as the plaintiff relationship can review the process at our attorney resources page or send a case for evaluation via the application portal.

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