Managing Your Practice: Answers to Frequently Asked Trust Account Questions
A lawyer's ethical obligation is to protect the client's funds and property. When questions arise about how to handle certain situations involving the trust account, many lawyers do not know where to find the answers. The Professional Liability Fund recently published 'A Guide to Setting Up and Using Your Lawyer Trust Account.' This guide is helpful in finding answers to your trust account questions. Below are some frequently asked questions involving the trust account and the answers to those questions.
Question: How many days after a check has been deposited do I have to wait before disbursing any funds?
Answer: Follow the 3-, 5-, and 10- day rule. Wait three banking days for local checks to clear, five banking days for in-state checks to clear, and ten banking days for out-of-state checks to clear.
Question: My trust account has had an outstanding check for several years. What do I do about it?
Answer: If the money cannot be returned to the client, follow the guidelines set out in the Disposition of Unclaimed Property Act, ORS 98.302-98.436.
Question: Can I have more than one trust account?
Answer: Yes. Some law firms may have multiple trust accounts in more than one bank to be sure all sums fall under FDIC insurance. Individual trust accounts can be established for individual clients if they have large sums of money in trust that will be in trust for a period of time. Interest on these individual accounts flows to the client.
Question: Can I pay client costs directly out of the trust account?
Answer: Yes, as long as the client has money in the trust account to cover the costs. If funds have been deposited on behalf of a client and they have not cleared, you either must wait until they clear or pay the costs out of your general account and reimburse the general account when the funds have cleared.
Question: Do I have to keep a minimum balance in my trust account?
Answer: Only if the bank requires a minimum balance. Then deposit just enough money to cover the minimum. However, most banks do not require a minimum balance for trust accounts.
Question: What if the bank takes check printing charges from the trust account?
Answer: DR 9-101 (A) (1) states that 'Funds reasonably sufficient to pay account charges...' may be deposited in the trust account.
Question: What if I have an overdraft on the trust account?
Answer: DR 9-102 (E) states, 'Every lawyer who receives notification from a financial institution that any instrument presented against his or her lawyer trust account was presented against insufficient funds, whether or not the instrument was honored, shall promptly notify Disciplinary Counsel in writing... The lawyer shall include a full explanation of the cause of the overdraft.'
Question: What happens when a sole signatory on the trust account dies?
Answer: ORS 9.705-ORS 9.755 provides that the court may take jurisdiction and appoint one or more lawyers who are in good standing in the Oregon State Bar to act as custodian of the affected lawyer's law practice.
Question: How long must trust account records be kept?
Answer: DR 9-101 (C) (3) states, 'Maintain complete records of all funds, securities and other properties of a client coming into the possession of the lawyer...for a period of at least five years after final disposition of the underlying matter....'
Question: If a check is received for more than the amount of the statement sent to the client, do the excess funds need to be placed in trust? Even if there is work in progress?
Answer: The entire amount of the payment should be placed in the trust account and the earned portion removed when the check clears. A new statement to the client should be sent showing the excess amount deposited to trust, the amount of work done on the matter and the amount that will be withdrawn to pay on the statement.
Question: What should be done with disputed funds?
Answer: These funds should be kept in trust until the dispute is resolved. If the funds have already been paid to the lawyer, the lawyer does not have to return the funds to trust but must be sure the funds are available to return to the client if the dispute is resolved in the client's favor. Or Ethics Op 1997-149. In the event the dispute cannot be resolved, the funds may be tendered into court for the court's determination. Or Ethics Op 1991-68.
'A Guide to Setting Up and Using Your Lawyer Trust Account' should answer any and all additional questions a lawyer may have regarding the operation of the trust account. It is a free publication and can be ordered by contacting Reiko Park at 503-639-6911/1-800-452-1639 or it can be ordered from the web site, www.osbplf.org.
You may also contact one of the Practice Management Advisors, Carol Wilson, Dee Crocker or Beverly Michaelis at the above telephone numbers for help with trust accounting problems.