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Q.
Must I open a trust account even though I never hold funds belonging to someone else?
A. No, but be careful that you recognize which funds must be held in trust. Most lawyers recognize that escrow funds or settlement funds must be deposited into a trust account, but some do not realize that the same is true for funds advanced by a client to pay filing fees, and for bond deposits refunds, where the lawyer has agreed to retain only a portion of the refund as his fee and to pay over the balance to the client or the client's relative. See the
Client Trust Account Handbook for a discussion of what funds must be maintained in a trust account.
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| 2) |
Q. What if I currently have a non-interest bearing trust account for pooled client funds?
A. Rule 1.15(d) requires that all nominal or short-term funds of clients paid to a lawyer or law firm must be deposited in one or more "pooled interest-bearing trust accounts...with the Lawyers Trust Fund of Illinois designated as the income beneficiary” (IOLTA accounts). The rule does not authorize pooled, non-interest bearing accounts, where the financial institution retains any earnings resulting from the pooled funds, or passes on
to the lawyer or law firm all or some of the interest generated by
the account in the form of interest or other favorable terms on
the law firm's other accounts with that financial
institution. The only trust accounts contemplated by Rule 1.15 other than IOLTA accounts are those where the interest is attributed and paid to a client.
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| 3) |
Q. I went to my bank to open an IOLTA account, and no one knew what I was talking about. Now what do I do?
A.
Many lawyers have had the same experience because not all banks
participate in the IOLTA program and because, in those that do,
not all personal bankers are familiar with the operation of IOLTA
accounts. For information on IOLTA-friendly banks and for
IOLTA sign-up forms, go to the Lawyers Trust Fund Web site at www.ltf.org.
If you can't find answers to your questions on the Web site,
e-mail your questions to Lawyers Trust Fund Director Ruth Ann
Schmitt at raschmitt@ltf.org.
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| 4) |
Q. What happens if I don’t provide the
trust account information required by Rule 756(d)?
A. You will not be registered. The failure to provide the information will be treated the same as a failure to pay the annual fee. Under Rule 756, the ARDC
is required to strike from the master roll of attorneys any lawyer who has failed to comply by February
1 of the registration year, and if you are stricken from the master roll for failure to properly register, you will not be authorized to practice law until you are reinstated by complying with all of the registration requirements.
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| 5) |
Q. Can I open a trust account for the benefit of one client that is not an IOLTA account?
A.
Yes. If the lawyer determines, usually in consultation with the client, that money will be held for a sufficiently long period of time
and/or in a sufficiently large amount, so that the client can realistically gain some substantial net interest, the lawyer may open a trust account for the benefit of one client, with the net interest remitted to that one client.
The interest rates being paid at any given time will affect the
amount and duration of funds needed to generate net
interest. The major caveat on interest is that the lawyer can never take the interest generated by funds the lawyer holds on another's behalf. Interest has to be paid to the client or the Lawyers Trust Fund.
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| 6) |
Q. I have a license in Missouri and Illinois. Our firm’s office is in Missouri, but occasionally I’ll handle an Illinois case for an Illinois client. Our firm has a trust account at a Missouri bank. Must I also have an Illinois account?
A. No. Rule 1.15(a) provides that a trust account shall be “maintained in the state where the lawyer’s office is situated, or elsewhere with the consent of the client or third person.”
Q. Do I disclose the Missouri trust account on the report form?
A. Yes.
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| 7) |
Q. I don’t have a trust account now, but
what if I open one during the year after I submit my registration
form, am I required to supplement my answers on the report form?
A. The rule does not require a supplemental report. You will report the account in the next year's registration.
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| 8) |
Q. I am also an agent for a title insurance company. Do I disclose the trust account I maintain as a title insurance agent?
A. Yes. Rule 1.15(a) comes into play when a lawyer comes into possession of the property of clients or third persons “in connection with a representation.” The lawyer’s work as a title insurance agent is associated with and related to the lawyer’s representation of clients in real estate transactions. If the lawyer’s holding of property for another was clearly personal (e.g., treasurer of the high school alumni association), the lawyer would not disclose that trust account on the report form.
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| 9) |
Q. I am an associate in a firm, and I have no authority over the firm's trust account. Can I just let the firm partners report the firm's account?
A. No. The rule requires that each lawyer report trust account information. Each member of a firm, partner or associate, has responsibility to ascertain that the firm has an appropriate account. The ARDC
has procedures that allow partners and associates in firms to join in a report by a designated firm partner, but
the procedure is available only where the firm collects registration forms and submits the collected forms and payment of the firm lawyers' registration
fees as a package. See
Unified Reporting Instructions.
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| 10) |
Q.
Our firm has an account that is used to maintain retainers paid by
our clients. Our agreements with the clients provide that
the firm will bill against the retainer and withdraw the billed
amounts until the retainer is exhausted, at which time the client
will be billed for any further amounts due. If a
representation is concluded and the retainer has not been
exhausted, the balance is returned to the client. Is this a
'trust account' which must be reported on the registration form?
A.
Yes. From your description of the account, it appears that
the firm treats the funds in the account as continuing to belong
to the clients until the firm has earned fees and withdrawn the
earned amounts, and the clients would expect that to be the case
based upon their fee agreements. The firm and the clients
would, presumably, not consider the funds held in this account to
be a firm asset, subject to liens by firm creditors. The
funds in the account would be subject to the requirements of Rule
1.15 of the Illinois Rules of Professional Conduct, and the
account would be one that should be reported on the registration
form.
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