Rule 1.15 imposes
several affirmative duties upon lawyers governing their handling of
property held in trust for clients or third persons in connection
with a representation. Those duties include:
1.
Duty to Notify Promptly
A lawyer has a duty to notify clients or third persons promptly upon
the receipt of funds or other property in which the client or third
person has an interest. The rationale for this duty is that since
the funds belong to the client or third person, the client or third
person must make necessary decisions about what to do with their
property. See Rule 1.15(d).
2.
Duty to Segregate
A lawyer has a duty to keep client or third person funds or property
separate from the lawyer's own property, so that the property is
protected from actual or potential loss. See Rule 1.15(a).
3.
Duty to Maintain Complete Records
A lawyer has a duty to properly maintain complete records of client
trust account funds and other property held in trust pursuant to
Rule 1.15 for a period of no less than seven years after the
end of the representation. See Rule 1.15(a). In
addition, Rule 1.15(a) specifics what complete records of client
trust account funds a lawyer must prepare and maintain. Also,
Supreme Court Rule 756(d) requires all Illinois lawyers, as part of
the annual registration process, to disclose whether the lawyer or
the lawyer’s law firm maintained a client trust account during the
preceding year.
4.
Duty to Account to Client
A lawyer has a duty to promptly render a full accounting, upon
request, to the client or third person regarding the funds or
property held or distributed by the lawyer. See Rule 1.15(d).
5.
Duty of Prompt Payment or Delivery of Client or Third Person
Property
A lawyer has a duty to promptly pay over or deliver to the client or
third person any funds or property that the client or third person
is entitled to receive. See Rule 1.15(d).
6.
Duty to Preserve the Integrity of Trust Property
The single most
important duty in handling trust property is the duty to refrain
from using that trust property for any purpose whatsoever, other
than as directed by the client or third person on whose behalf the
lawyer is holding property in trust. This includes any unauthorized
use by the lawyer of the client's or third person’s funds entrusted
to the lawyer, including not only stealing, but also unauthorized
temporary use for the lawyer's own purpose, whether or not the
lawyer derives any personal gain or benefit. Misappropriation occurs
not only when the lawyer uses the trust funds to pay the lawyer's
own personal obligations, but also, for example, when the lawyer
disburses trust funds to one client before the deposits, which are
the source of the disbursement, have either cleared or are at least
available for withdrawal, thereby using one client's funds to pay
another client. In re Elias, 114 Ill.2d 321, 499 N.E.2d 1327
(1986).
B.
Definitions
1.
"Trust" Account
The word "trust" is used to reflect the
fiduciary role in which a lawyer receives or holds property in
connection with a representation on behalf of a client or a third
person. See
Comment [1] to Rule 1.15. When such property takes the form of
funds, the word “trust” is an important label to distinguish those
accounts where funds are being held in trust from the accounts
containing the lawyer's own property.
Gurnett v. Mutual Life Insurance
Co. of New York, 356 Ill. 612, 191 N.E. 250 (1934).
2.
Commingling
Commingling occurs when
a lawyer either deposits trust funds belonging to a client or third
person into the lawyer's own personal or business account or when
the lawyer maintains the lawyer’s own personal funds in the client
trust account, other than as permitted by Rule 1.15(b), such as where the lawyer does not
withdraw promptly from the client trust account his earned fees.
See In re Clayter, 78 Ill.2d 276, 399 N.E.2d 1318 (1980).
The Illinois Supreme Court has frequently warned that
commingling of a lawyer’s funds with trust funds is often the “first
step” toward conversion of trust funds. See Dowling v. Chicago
Options Associates, Inc., 226 Ill.2d 277, 293-94, 875
N.E.2d 1012, 1022 (2007).
3.
Conversion
Conversion, a common law
tort, has been defined by the Illinois Supreme Court in the context
of attorney disciplinary proceedings as "'any unauthorized act,
which deprives a man of his property permanently or for an
indefinite time.'" In re Thebus, 108 Ill.2d 255, 259, 483
N.E.2d 1258 (1985), quoting Union Stock Yard & Transit Co.
v. Mallory, Son & Zimmerman Co., 157 Ill. 554, 563 (1895).
Conversion of trust funds occurs when a lawyer uses those funds for
a purpose other than that for which they were delivered. Conversion
is typically proven when the client trust account is either
overdrawn or when the lawyer allows the balance in the client trust
account to become less than the sum total of all client and/or third
person funds the lawyer is required to maintain in trust. In re
Ushijima, 119 Ill.2d 51, 58, 518 N.E.2d 73, 76 (1987); In re
Cheronis, 114 Ill.2d 527, 502 N.E.2d 722 (1986).
4.
"Client Trust Account"
A "client trust account" is defined under Rule 1.15(a) as "an
IOLTA account as defined in Paragraph (i)(2), or a separate,
interest-bearing non-IOLTA client trust account established to hold
the funds of a client or third person as provided in paragraph (f)."
It is a "special" bank account, usually a checking or savings
account, that is a depository for all funds belonging to clients and
other persons coming into the lawyer's possession in connection with
a representation. Under Rule 1.15(a), it will be
either a
separate and identifiable interest- or dividend-bearing client trust
account opened on behalf of one client or matter (usually in
situations where there is a large amount of money being held for a
long period of time), where the interest earned on the account can
be calculated and remitted to the individual client or third person
or it will be a pooled account where the moneys of several clients
are held (usually nominal or short-term funds), where the interest
earned on the account may go
is remitted to the IOLTA program (see discussion of IOLTA
accounts below). A lawyer may have one or more client trust accounts
depending on need.
Rule 1.15(a) prohibits funds of clients or third persons from being
deposited in non-interest or non-dividend-bearing accounts.
Rule 1.15(g) provides that in determining the type of account to
deposit funds for a client, the lawyer or law firm must take into
consideration the amount of interest that the funds would earn for a
client during the period they are expected to be held, the cost of
establishing and maintaining the account, and the capability of the
financial institution, through subaccounting, to calculate and pay
interest earned by each client’s funds, net of any transaction
costs, to the individual client. Rule 1.15(g) also makes clear that
the decision as to the type of client trust account appropriate
under the circumstances rests within the reasonable judgment of
lawyer or law firm and
"no charge of ethical impropriety or other breach of professional
conduct shall attend to a lawyer’s or law firm’s exercise of
reasonable judgment under this rule or decision to place client
funds in an IOLTA account or a non-IOLTA client trust account on the
basis of that determination"
Regardless of the type of account the lawyer decides to deposit
funds, it is axiomatic that a lawyer cannot take the interest earned
on the funds held in trust.
See In re Kitsos, 127 Ill.2d 1, 535 N.E.2d 792 (1989).
5.
IOLTA Trust Accounts
Rule 1.15(i)(2)
defines “IOLTA account” as “an interest-
or dividend-bearing client trust account benefitting the Lawyers
Trust Fund of Illinois, established in an eligible institution for
the deposit of nominal or short-term funds of clients or third
persons as defined in paragraph (f) and from which funds may be
withdrawn upon request as soon as permitted by law.”
6.
Eligible financial institution
Funds held in the client trust account must be maintained at an "eligible
financial institution"
selected by the lawyer in the exercise of ordinary prudence. See
Rule 1.15(a).
Rule 1.15(i)(3) defines an
"eligible financial institution"
as "a bank or
a savings bank insured by the Federal Deposit Insurance Corporation
or an open-end investment company registered with the Securities and
Exchange Commission that agrees to provide dishonored instrument
notification regarding any type of client trust account as provided
in paragraph (h) of this Rule; and that with respect to IOLTA
accounts, offers IOLTA accounts within the requirements of paragraph
(f) of this Rule."
For a list of eligible financial institutions, please consult the
Lawyers Trust Fund of Illinois website at www.ltf.org.
III. Identifying and Protecting
Trust Property
A.
Key Characteristics of Holding Trust Funds and Property
To understand and
fulfill the requirements of Rule 1.15, property held in trust must
have all of the following three distinct and essential
characteristics: 1) separate; 2) accountable; and 3) identifiable. A
lawyer cannot discharge those duties unless the way in which the
property is held in trust can satisfy all of these requirements.
See Rule 1.15(a).
1.
Separate
Under Rule 1.15(a),
property of clients or third persons that is in a lawyer’s
possession in connection with a representation must be kept separate
from the lawyer’s own property. A lawyer holding property of
clients or third persons in trust should exercise the care required
of a professional fiduciary. See Comment [1] to Rule
1.15. For funds, the monies must be maintained in an interest-
or dividend-bearing account that is separate and identifiable from
the lawyer's personal and business accounts. Holding client or
third person funds in a safety deposit box, file cabinet or desk
drawer is usually not an acceptable way of safekeeping trust funds
and has been condemned by the Supreme Court, which has stated that
"such a covert method of handling a client's funds is highly
unprofessional and one which can only create suspicion and harmful
inference." In re Lingle, 27 Ill.2d 459, 463-64, 189 N.E.2d
342 (1963); In re Ashbach, 13 Ill.2d 411, 419, 150 N.E.2d 119
(1958). Due to the danger of conversion or other risk of loss, "it
is essential that a client's money be held in such a manner that
there can be no doubt that the lawyer is holding it only for another
and that the money does not belong to him personally." In re
Johnson, 133 Ill.2d 516, 531, 552 N.E.2d 703, 710 (1989).
Separation:
·
protects the funds from levy by the lawyer's or law
firm's creditors, including levy by the IRS (see In re Enstrom,
104 Ill.2d 410, 415, 472 N.E.2d 446, 449 (1984));
·
allows the account to be found in the event the lawyer
becomes ill, incompetent or dies;
·
protects the funds from being considered part of the
lawyer's estate in the event the lawyer files for bankruptcy, is
going through a marital dissolution proceedings or dies; and
·
discourages the lawyer from recklessly or
intentionally misappropriating client funds for the lawyer's own
personal use.
2.
Accountable
The lawyer must be
able to make a full and accurate accounting at any time to the
client or third person of the funds or property held in trust. This
is done through updated and accurate record keeping and Rule
1.15(a)(1)-(7) specifies what lawyers must prepare and maintain to
fulfill this duty. For trust funds, the lawyer MUST be able to tell
the client or third person the following:
·
exactly how much monies were deposited;
·
how monies were disbursed; and
·
how much remains in the account for each client or
third person on whose behalf the funds are being held.
3.
Identifiable
The account must be
clearly labeled as a client trust account and should use such
designations as "client trust account," "client funds account" or
similar words that would indicate the fiduciary nature of the
account. See Comment [1] to Rule 1.15. Therefore, the
account must be opened as a client trust account, with the checks
and deposit slips imprinted with that title. Merely opening an
account in the lawyer’s or law firm’s name and treating the account
as a client trust account is not enough. See In re Clayter,
78 Ill.2d 276, 281, 399 N.E.2d 1318 (1980) (savings account, which
was in the name of respondent who testified that he kept clients'
funds in this account and that he had written "clients trust
account" on the face of the passbook, was not a separate and
identifiable client trust account).
Identifying the
account as a client trust account serves as notice to the world that
the funds in this account are not the lawyer's or law firm's
personal or business assets and further safeguards the trust funds
from any attempts to get at the lawyer's or law firm's assets
through the trust fund account.
B.
Funds to be Held in the Client Trust Account
1. What MUST be held in a Client Trust Account?
a.
All funds or property belonging to a client or third person
entrusted to the lawyer in connection with a representation,
regardless of whether the lawyer regularly handles trust funds.
See Rule 1.15(a). E.g., advances for filing fees or
costs of retaining an investigator or expert; money to pay the
client's creditors; rents collected on behalf of the client.
b.
Funds to secure payment of legal fees and expenses to be
withdrawn by the lawyer only as fees are earned and expenses
incurred and are not received as a fixed fee, a general retainer, or
an advance payment retainer as provided in Rule 1.15(c).
See discussion infra part IV.D.6.
c.
All funds or property in the lawyer’s possession in which a
client or third person has an interest. See Rule 1.15(a).
E.g., escrow funds held back in a real estate closing; escrow
funds held pending the disposition of property in a dissolution of
marriage proceeding.
d.
Those funds or property being held by the lawyer or law firm
in which two or more persons (one of whom may be the lawyer or law
firm) have competing claims to the funds or property and ownership
claims that are unresolved. See Rule 1.15(e) and
Comments [3] & [4] to Rule 1.15. E.g., amounts in
dispute where the lawyer is holding funds as an escrowee; a dispute
over the amount of a lien asserted by a medical provider on
settlement funds; a dispute with a client over the lawyer’s fees or
expenses.
e.
All nominal or short-term funds of clients or third persons
held by the lawyer or law firm, including advances for costs and
expenses, and funds belonging in part to a client or third person
and in part, presently or potentially, to the lawyer or law firm. See
Rule 1.15(f). E.g., settlement funds; bond refund checks.
2. What funds MAY
be held in a Client Trust Account?
Funds of the lawyer
necessary to pay bank services charges such as the bank's minimum
balance requirements to open or maintain the client trust account.
See Rule 1.15(b).
3. What funds MUST
NOT be held in a Client Trust Account?
a.
Lawyer's own personal funds.
b.
Lawyer's business and investment monies.
c.
Fees that have been earned and funds received as a fixed fee,
a general retainer or an advance payment retainer under Rule
1.15(c). See infra part IV.D.6, at p. 22.
4. What MUST go into an IOLTA Client Trust Account?
Client funds that are
nominal in amount or expected to be held for a short period of time
shall be deposited into one or more "pooled" interest-bearing client
trust accounts with the interest paid to the Lawyers Trust Fund of
Illinois under Rule 1.15(f). E.g., most settlement funds are
typically considered short-term since they must be promptly paid to
the client once the settlement check has cleared.
Rule 1.15(g) provides
that the decision as to whether funds are long-term or short-term,
substantial or nominal, rests in the sound judgment of the
depositing lawyer or law firm and no charge of ethical impropriety
or other breach of professional conduct shall arise out of the
lawyer's reasonable judgment on what is nominal or short-term.
In determining whether funds must be deposited into an IOLTA or non-IOLTA
client trust account, Rule 1.15(g) sets forth the following factors
that ordinarily the lawyer or law firm would take into
consideration:
a.
the amount of interest which the funds would earn during
the period they are expected to be deposited;
b.
the cost of establishing and administering the account,
including the cost of the lawyer's services;
c.
the capability of the financial institution, through
subaccounting, to calculate and pay interest earned by each
client's funds, net of any transaction costs, to the individual
client.
C.
Trust Property Other Than Cash
The duties of
safekeeping property under Rule 1.15 apply both to funds and
tangible trust property.
See Rule 1.15(a). As funds must be kept in a separate,
identifiable and interest- or dividend-bearing client trust account,
other property must also be appropriately identified as trust
property and adequately safeguarded. See Rule 1.15(a).
When the lawyer receives tangible trust property, as with money held
in trust, the lawyer must (1) clearly identify or label it as trust
property; (2) keep trust property separate from the lawyer's own
property; and (3) take appropriate safeguards to protect and
preserve trust property. This means that the lawyer should identify
and label the trust property promptly upon receipt and place it in a
safe deposit box or other place of safekeeping as soon as possible.
The safe deposit box, like the client trust account, should bear a
label that clearly identifies it as the repository of property not
belonging to the lawyer but property held in trust on behalf of
clients, such as “Clients’ Safe Deposit Box,” and must not contain
any of the lawyer’s property. See Comment [1] to Rule
1.15.
The lawyer must also
keep records that sufficiently describe the items that are being
held in trust, for whose benefit, and where they are being held.
Below is an example of the type of record that could be made with
respect to items being held in a safe deposit box:
Trust Safe Deposit Receipt
Received this ____ day of _____,
20__, by ________ _______________________
___________________________________________________________________
___________________________________________________________________
(Description of item(s) being placed into safe deposit box – if
items are numbered such as stocks or bonds, specify numbers.)
Item(s)
being held in trust for: __________________________________________
Firm
Name: ________________________________________________________
Client
Name: _______________________________________________________
Item(s)
being placed into safe deposit box by: _____________________________
Any
questions regarding contents should be addressed to:
____________________
Name and
Address of bank where Safe Deposit located: ______________________
Safe
Deposit Box ID Number: __________________________________________
Anticipated period of time item(s) will be held:
____________________________
IV.
Basics of Opening and Operating a Client Trust Account
A.
Determining the Kind of Client Trust Account
Under Rule 1.15(a), there are two types
of client trust accounts: an account opened on behalf of one client
or client matter (usually in situations where there is a large
amount of money being held for a long period of time, such as an
estate matter) where the interest earned on the account can be
calculated and remitted to the individual client or an account where
the funds of several clients are held (usually nominal or short-term
funds), where the interest earned on the account goes to the IOLTA
program. A lawyer may have one or more client trust accounts
depending on need.
Rule 1.15(a) explicitedly prohibits depositing funds of clients or
third persons into a non-interest or non-dividend-bearing account.
In determining the type of account to
deposit funds for a client, the lawyer or law firm in the exercise
of reasonable judgment would ordinarily take into consideration the
amount of interest that the funds would earn during the period they
are expected to be held, the cost of establishing and maintaining
the account, and the capability of the financial institution,
through subaccounting, to calculate and pay interest net of any
transaction costs. See Rule 1.15(g).
B.
IOLTA Client Trust Accounts
Rule 1.15(f) requires
that all funds of clients or third persons
which are nominal in amount or are expected to be held for a short
period of time, must be deposited in one or more IOLTA client
trust accounts.
An IOLTA client trust account is
defined in Rule 1.15(i)(2) as "a
pooled interest- or dividend-bearing client
trust account,
established with an eligible financial institution with the Lawyers
Trust Fund of Illinois designated as income beneficiary," where
nominal or short-term funds of clients or third person are being
held. “IOLTA" is the
acronym for the "Interest on Lawyer Trust Accounts" program run by
the Lawyers Trust Fund of Illinois, a non-profit corporation
incorporated in 1981 by the Illinois State Bar and Chicago Bar
associations.
The IOLTA account is
operationally different from a non-IOLTA client trust account in two
respects, one, that the taxpayer identification number (TIN) on the
account is the Lawyers Trust Fund of Illinois' and not the client's
or third person’s, the lawyer's or the law firm's and, second, the
interest earned on the account is collected by the bank, and is
sent, along with the remittance report, to the Lawyers Trust Fund of
Illinois.
The net interest or
dividends earned on IOLTA client trust accounts is paid directly to
the Lawyers Trust Fund of Illinois, which uses the money to fund
legal assistance and other programs benefiting the public throughout
the state, as approved by the Supreme Court of Illinois.
The Lawyers Trust Fund
of Illinois is located at Two Prudential
Plaza, 180 North Stetson Avenue, Suite 820, Chicago, IL 60601
(312) 938-2906 [Main Phone] (312) 938-3091 [Fax]
1-800-624-8962 [Toll Free]. Inquiries concerning the
IOLTA program may be directed to Ruth Ann Schmitt, Executive
Director, Lawyers Trust Fund of Illinois, at the above address or
phone number or you may visit the Lawyers Trust Fund of Illinois
website at
www.ltf.org.
The decision as to
whether funds are nominal in amount or are expected to be held for a
short period of time rests within the reasonable judgment of the
lawyer or law firm and no charge of ethical impropriety or breach of
professional conduct will result from the lawyer’s or law firm’s
exercise of reasonable judgment on what is nominal or short term.
See
Rule 1.15(g).
All IOLTA and non-IOLTA
client trust accounts must be maintained only at an "eligible
financial institution." An "eligible financial
institution" is a bank or savings bank insured by the FDIC, as well
as an open-end investment company registered with the Securities and
Exchange Commission, which offers IOLTA accounts within the
requirements of the Rule 1.15(f) as administered by the Lawyers
Trust Fund and has agreed to provide
dishonored instrument notification regarding any type of client
trust account as provided in Rule 1.15(h).
The Lawyers Trust Fund website (www.ltf.org) has a listing of
those institutions. To contact the Lawyers Trust Fund of Illinois by
phone, please call (800) 624-8962 or (312) 938-2906.
C.
Opening the Client Trust Account
1.
Form - Rule 1.15(a) sets
forth the general requirements of all client trust accounts, IOLTA
and non-IOLTA which must be 1) separate and identifiable as a a
client trust account; 2) interest- or dividend-bearing with the
income beneficiary for IOLTA client trust accounts being the Lawyers
Trust Fund of Illinois and for non-IOLTA client trust accounts the
client designated as income beneficiary;
and 3) maintained at an eligible financial institution in
the state where the lawyer's office is situated, or elsewhere with
the informed consent of the client or third person.
Generally, the client trust account can be a savings account,
checking account or certificate of deposit at a federally insured
bank or savings and loan.
For IOLTA client trust accounts, the account must also meet the
requirements as set forth in Rule 1.15(f) and be subject to
withdrawal promptly upon request (e.g., a corporate/business
checking account, such as a NOW account).
See Rule 1.15(f) & (i)(2).
2.
Location - The account must be maintained in the state
where the lawyer’s office is located or elsewhere with the consent
of the client or third person as provided in Rule 1.15(a).
For an IOLTA client trust account located in Illinois, it must be
established at
an eligible financial institution authorized by federal or state law
to do business in the state of Illinois.
See Rule 1.15(f)(1).
If the client trust account is
located outside of Illinois either because the lawyer is licensed
and practices in that other jurisdiction or because the client or
third person has otherwise directed the lawyer, care must taken that
the client trust account complies with that state’s trust accounting
rules.
See also ILRPC Rule 8.5(b) (Choice of Law).
In situations where
the client or third person wants the client trust account opened in
another state, it is advisable to get the consent of the client or
third person in writing.
3.
Eligible Financial Institution - All client trust accounts,
IOLTA and non-IOLTA, must be maintained at an "eligible" financial
institution.
Rule 1.15(i)(3) defines
"eligible financial institution"
as "a bank or
a savings bank insured by the Federal Deposit Insurance Corporation
or an open-end investment company registered with the Securities and
Exchange Commission that agrees to provide dishonored instrument
notification regarding any type of client trust account as provided
in paragraph (h) of this Rule; and that with respect to IOLTA
accounts, offers IOLTA accounts within the requirements of paragraph
(f) of this Rule."
For a list of eligible financial institutions, please consult the
Lawyers Trust Fund of Illinois website at www.ltf.org.
4. Know Your Financial Institution - Know the
financial institution’s charges and fees for maintaining such
accounts and obtain a copy of the account agreement with the
financial institution. Know the financial institution’s
schedules for posting and crediting deposits. Know what the
federally insured limits are on deposits. At the end of 2010,
unlimited FDIC deposit insurance coverage of IOLTA trust accounts
was extended to December 31, 2012. Under the FDIC’s program,
IOLTA accounts are fully guaranteed by the FDIC for the entire
amount in the account over and above the $250,000/per client/third
person coverage available under the FDIC's general deposit insurance
rules. To receive pass-through coverage, (1) the deposit
account records generally must indicate the account's custodial or
fiduciary nature and (2) the details of the relationship and the
interests of other parties in the account must be ascertainable from
the deposit account records or from records maintained in good faith
and in the regular course of business by the depositor or by some
person or entity that maintains such records for the depositor. If
the account receives pass-through coverage, then each owner of funds
in the account is insured for his or her share in the account up to
$250,000 including any other funds held by or for the owner at the
same insured institution. The final rule is available at:
http://www.fdic.gov/news/board/2011Janno2.pdf.
Investigate the financial institution's requirements for opening and
maintaining a client trust account such as the minimum balance to
earn interest, bank charges to handle the account, check printing
charges, and the collection process to clear intrastate and
interstate checks and other instruments. The Lawyers Trust
Fund website (www.ltf.org)
has a section on its site with information for financial
institutions describing the IOLTA program, how a financial
institution can become certified by the Lawyers Trust Fund, the
forms necessary to set up an IOLTA account and how interest is to be
reported and remitted.
5.
Naming the Client Trust Account - The client trust
account must bear the lawyer or law firm's name and include such
designations as "Client Trust Account," "Client Escrow Account,"
"Attorney Trust Account" or "Real Estate Funds Account" or any other
name which would clearly identify it as a client trust account.
Illinois does not require a particular form of identification on the
client trust account but the name of the account must be
sufficiently clear to serve as notice to the world that it is a
client trust account and not an account belonging to the attorney.
See
Comment [1] to Rule 1.15(a). Also, it is important for
FDIC insurance coverage of the trust property that the fiduciary
nature of the account can be ascertained from the bank’s deposit
account records. For IOLTA accounts, do not identify the
Lawyers Trust Fund of Illinois as designee, trustee or owner of the
account. For non-IOLTA client trust accounts, which are opened
for the benefit of a particular client or third person, the name of
the account would include that fact.
6.
Opening an IOLTA Client Trust Account - For an IOLTA
account, the lawyer or firm enrolls in the IOLTA program by
completing the sign-up forms (Notice to Financial Institution to
Establish IOLTA Account and Notice of Enrollment in the IOLTA
Program) and submitting the forms to the bank. The enrollment
forms instruct the bank to establish an IOLTA account. The
taxpayer identification number (TIN) on the account is the Lawyers
Trust Fund of Illinois. The IOLTA enrollment forms may be
submitted electronically or downloaded from the Lawyers Trust Fund
website at
www.ltf.org
or obtained by contacting the Lawyers Trust Fund at (800) 624-8962
or (312) 938-2906.
7.
Select Client Trust Account Checks that are
Distinguishable from Business Account Checks - Select checks
that have the client trust account name on them and are of a
different color than those of the operating account so that checks
written on the client trust account can be more easily distinguished
from checks written on the attorney's operating account. Also, some
lawyers maintain their business and personal accounts at a different
financial institution from where they have their client trust
accounts so that no client trust account moneys will be
inadvertently accessed.
8.
Select Signatories with Care - Illinois does not
prohibit a lawyer from delegating check-signing authority to someone
other than the lawyer. However, the lawyer has a non-delegable duty
to protect and preserve the funds in the client trust account (see
In re Vrodolyk, 137 Ill.2d 407, 560 N.E.2d 840 (1990)) and can
be disciplined for failure to supervise subordinates. See In re
Waddy, M.R. 13084, 95 CH 686 (Ill. 1997).
D.
Handling Certain Types of Funds and Property
1.
Litigation Expenses
If a client advances
to the lawyer money for litigation costs and expenses to be incurred
in the future, the money shall be deposited and maintained in the
client trust account until the expense has been incurred.
See
Rule 1.15(c) & (f). If a lawyer advances the court costs and
expenses of litigation on behalf of a client, which is permitted
under Rule 1.8(e), and bills the client for the expense, the funds
received by the lawyer would not be deposited in the client trust
account since the client is reimbursing the lawyer. Expenses
must be reasonable as governed by Rule 1.5.
2.
Handling Settlement Checks
Settlement checks in
contingent fee matters typically will have as payees the client, the
lawyer or lawyer’s law firm and any third persons who have served a
notice of a lien on the proceeds (often a medical provider).
The settlement check must be deposited in the client trust account.
Some lawyers may be tempted to deposit the settlement check into the
lawyer’s business account and write the client’s portion of the
proceeds from the lawyer’s own business account. This is a
violation of rule which requires that funds belonging, in whole or
in part, to a client shall be deposited in the client trust account.
See In re Elias, 114 Ill.2d 321, 333, 449 N.E.2d 1327, 1331
(1986).
When disbursing the
funds the proper procedure is to secure the signatures of all the
payees and deposit the settlement check into the client trust
account. A deposit in the client trust account may not be
disbursed until the funds are at least available for withdrawal as
determined by the account agreement with the financial institution.
If a lawyer writes a check to the client or others for settlement
proceeds before the settlement has been credited to the account on
the theory that there is other money in the client trust account, if
the check is honored it will be drawing on the funds of other
clients. This is conversion because it is the unauthorized use
of one client’s money to pay another client. See In re
Thebus, 108 Ill.2d 255, 260, 483 N.E.2d 1258, 1260 (1985).
3.
Real Estate Transactions
Lawyers who act as closing agents for real estate
transactions face the dilemma of the commercial necessity of
immediately issuing checks from the client trust account on funds
that have not even been deposited, much less cleared the banking
process. Rule 1.15(j) was added in late 1998 (previously Rule
1.15(g)), to permit lawyers in the closing of a real estate
transaction to disburse funds deposited, but not yet collected, so
long as the lawyer deposited the funds into a segregated Rule Estate
Funds Account (REFA), established prior to the closing and
maintained solely for the receipt and disbursement of such funds,
and the lawyer was either acting as a closing agent as prescribed by
Rule 1.15(j)(1) or the instrument for deposit meets the “good-funds”
requirements set forth in Rule 1.15(j)(2). However, while the
rule protects a lawyer from any disciplinary consequences in this
context, Rule 1.15(j)(2) states that the disbursing lawyer is
responsible for reimbursing the client trust account for such funds
that are not collected and for any fees, charges and interest
assessed by the paying bank on account of such funds being
uncollected.
4.
Non-Client and Third Person Claims
The duties of prompt
notification, delivery and accounting of trust property may also
extend to third persons. Medical providers who have perfected
their lien on the settlement funds or a lawyer who has agreed to
hold earnest money as an escrowee in a real estate transaction are
common examples in which a lawyer has a fiduciary duty to
non-clients to protect and preserve funds the non-client is
presently or potentially entitled.
5.
Disputed Amounts
When there is a
dispute over property held in trust, whether it be between the
client and a third person or between the client and lawyer, Rule
1.15(e) requires the lawyer to maintain the disputed portion of the
funds in the client trust account until the dispute is resolved.
Typical examples arise in connection with amounts the lawyer is
holding as an escrowee in a real estate transaction or when there is
a dispute over the amount of lien asserted by a medical provider or
when the client disputes the amount of the fees the lawyer claims
are earned. For fee disputes with the client, Comment [3] of
Rule 1.15 instructs:
[3] Lawyers often receive funds from which
the lawyer’s fee will be paid. The lawyer is not required to remit
to the client funds that the lawyer reasonably believes represent
fees owed. However, a lawyer may not hold funds to coerce a client
into accepting the lawyer’s contention. The disputed portion of the
funds must be kept in a client trust account and the lawyer should
suggest means for prompt resolution of the dispute, such as
arbitration. The undisputed portion of the funds shall be promptly
distributed…
For third parties that
may have lawful claims to the funds, Comment [4] of Rule 1.15 gives
the following guidance:
[4] Paragraph (e) also recognizes
that third parties may have lawful claims against specific funds or
other property in a lawyer’s custody, such as a client’s creditor
who has a lien on funds recovered in a personal injury action. A
lawyer may have a duty under applicable law to protect such
third‑party claims against wrongful interference by the client. In
such cases, when the third-party claim is not frivolous under
applicable law, the lawyer must refuse to surrender the property to
the client until the claims are resolved. A lawyer should not
unilaterally assume to arbitrate a dispute between the client and
the third party, but, when there are substantial grounds for dispute
as to the person entitled to the funds, the lawyer may file an
action to have a court resolve the dispute.
6. Retainers and
Advances for Fees
Effective January 1, 2010,
Rule 1.15(c) governs how legal fees and expenses received in advance
are to be handled. Funds advanced by a client to secure
payment of legal fees and expenses, to be withdrawn as fees are
earned and expenses incurred, also referred to as a “security”
retainer, shall be deposited in the lawyer’s client trust account.
Funds received as a fixed fee, a general retainer, or an advance
payment retainer shall be deposited in the lawyer's own personal or
business account and not in the client trust account.
The attributes of these
types of fee arrangements and the principles guiding their drafting
and interpretation were first articulated by the Supreme Court in
Dowling v. Chicago Options Associates, Inc., 226 Ill.2d 277, 875
N.E.2d 1012 (2007) and are now incorporated in Rule 1.15(c) and
Comments [3A] through [3C]. Dowling was not a
disciplinary case but a civil matter involving a dispute over
whether a retainer paid by a client to his lawyers remained the
property of the client and could be subject to a turnover order to
the client’s creditor. The Court addressed the issue not
covered by prior Rule 1.15: the ownership to funds advanced by a
client for lawyer’s fees and where those funds must be deposited.
Based on Dowling, Rule 1.15(c) sets forth the different types
of retainers permissible in Illinois and where those funds must be
deposited as follows:
Classic Retainer.
Also referred to as a “true,” “engagement,” or “general” retainer,
funds are paid by a client to the lawyer in order to secure the
lawyer’s availability during a specified period of time or for a
specified matter. This type of retainer is earned when paid and
immediately becomes property of the lawyer, regardless of whether
the lawyer ever actually performs any services for the client and,
therefore, is not deposited in the client trust account. See
Comment [3B] to Rule 1.15; Dowling, 226 Ill.2d 277, 287, 875
N.E.2d 1012, 1019 (2007).
Security Retainer.
Under this type of retainer, funds paid to the lawyer are
not considered present payment for future services but are intended
to secure payment of fees for the future services the lawyer is
expected to perform. This type of retainer remains the property of
the client and, therefore, must be deposited in a client trust
account and kept separate from the lawyer’s own property until the
lawyer applies it to charges for services that are actually
rendered.
If the lawyer and client agree that
the client will pay a security retainer, that term should be used in
any written agreement.
Any unused portion of the
retainer is refunded to the client under Rules 1.15(b) and 1.16(d)
of the Illinois Rules of Professional Conduct. See
Comment [3B] to Rule 1.15; Dowling, 226 Ill.2d 277, 287, 875
N.E.2d 1012, 1019 (2007).
Advance Payment Retainer. In contrast to the security
retainer, the funds paid to the lawyer under this retainer
are intended by the client to be present payment to the lawyer in
exchange for the commitment to provide legal services in the future.
Ownership of this retainer passes to the lawyer immediately upon
payment and is the lawyer’s property and, therefore, may not be
deposited in the client trust account; however, any
portion of an advance payment retainer that is not earned must be
refunded to the client.
An advance payment retainer is utilized
only “sparingly,” in other words, when necessary to accomplish a
purpose for the client that is appropriate under the circumstances
of the matter such as in the Dowling case where a debtor
wants to ensure that he has sufficient funds beyond the reach of
judgment creditors in order to secure legal counsel. See
Comment [3C] to Rule 1.15. Other examples the Court gave in
Dowling of the limited circumstances in which the use of an
advance payment retainer is appropriate are in a
bankruptcy case where,
before filing a petition, a debtor’s attorney receives a retainer
for services to be rendered in connection with the debtor’s
bankruptcy case (see Dowling, 226 Ill.2d at 289, 875
N.E.2d at 1020) or where a criminal defendant whose property may be
subject to forfeiture may wish to use an advance payment retainer to
ensure that the client has sufficient funds to secure legal
representation. See Dowling, 226 Ill.2d at 294,
875 N.E.2d at 1023. In the
“vast majority of cases,” the funds paid to retain a lawyer will be
considered a security retainer and placed in the client trust
account.
See Comment [3C] to Rule 1.15; Dowling, 226 Ill.2d
277, 288, 875 N.E.2d 1012, 1019 (2007).
Rule 1.15(c) further
proscribes the terms of an advance payment retainer. An
advance payment retainer must be in writing, signed by the client,
must use the term "advance payment retainer" to describe the
retainer and must include in the agreement all of the
following provisions:
1) the special purpose for the
advance payment retainer and an explanation why it is advantageous
to the client;
(2) that the retainer will not be
held in a client trust account, that it will become the property of
the lawyer upon payment, and that it will be deposited in the
lawyer’s general account;
(3) the manner in which the retainer will
be applied for services rendered and expenses incurred;
(4) that any portion of the
retainer that is not earned or required for expenses will be
refunded to the client (see Comments [3B]
through [3D] to Rule 1.15 and Rule 1.16(d));
and
(5) that the client has the option
to employ a security retainer, provided, however, that if the lawyer
is unwilling to represent the client without receiving an advance
payment retainer, the agreement must so state and provide the
lawyer’s reasons for that condition.
Fixed/Flat Fee Agreements. In addition to the
three types of retainers described above, Rule 1.15 recognizes fixed
fee agreements, also referred to as a
“flat” or “lump-sum” fee, where the lawyer agrees to provide a
specific service (e.g., defense of a criminal charge, a real
estate closing, or preparation of a will or trust) for a fixed
amount paid by the client to engage a lawyer at the outset of a
matter. Unlike an advance payment retainer, a fixed fee is
generally not subject to the obligation to refund any portion to the
client; however, a fixed fee is subject, like all fees, to scrutiny
and the fee charged must reasonable under the circumstances as set
forth in Rule 1.5(a) and any portion of the fee must be refunded to
the client under Rule 1.16(d) if retention of the entire fee would
be unreasonable and excessive under the circumstances. See
Comments [3B] through [3D] to Rule 1.15 and Comment [10] to Rule
1.16(d); see also In re Serritella, M.R. 21655, 03 SH 115
(Ill. 2007) (retention of $10,000 flat fee for only three
hours of work was unreasonable under Rule
1.5(a) and unearned fees must be refunded under Rule 1.16).
General Considerations
for All Fee Agreements
While Illinois recognizes
the general rule of freedom of contract between lawyers and clients
with respect to fee agreements, the “guiding principle” is what is
in the best interests of the client. The type of retainer that
is in the client’s best interests will depend on the circumstances
of each case and the reasonableness, structure, and division
of legal fees governed by Rule 1.5 and other applicable law.
See Comments [3A], [3C] & [3D] to Rule 1.15.
The Court in Dowling
provided guidance to the profession in determining which
types of retainers are appropriate. The Court counseled:
The guiding principle,
however, should be the protection of the client’s interests. In the
vast majority of cases, this will dictate that funds paid to retain
a lawyer will be considered a security retainer and placed in a
client trust account, pursuant to Rule 1.15. Separating a client’s
funds from that of the lawyer protects the client’s retainer from
the lawyer’s creditors. See In re Lewis, 118 Ill. 2d 357,
362-63 (1987). Commingling of a lawyer’s funds with those of a
client has often been the first step toward conversion of a client’s
funds. In addition, commingling of a client’s and the lawyer’s funds
presents a risk of loss in the event of the lawyer’s death. In re
Clayter, 78 Ill. 2d 276, 281 (1980). Thus, advance payment
retainers should be used only sparingly, when necessary to
accomplish some purpose for the client that cannot be accomplished
by using a security retainer.
Dowling, 226 Ill. 2d at 289, 875 N.E.2d at 1020.
Also, a client has an
unqualified right to discharge a lawyer and, if discharged, the
lawyer may retain only a sum that is reasonable in light of the
services the lawyer performed prior to being discharged.
All fee agreements are subject to
the requirement of Rule 1.5(a) that a lawyer may not charge or
collect an unreasonable fee and any fees that have not been earned
must be refunded to the client. See Comments [3B]
through [3D] to Rule 1.15 and Comment [10] to Rule 1.16(d).
Practice Pointer – All
retainer agreements should:
1.
be in writing, signed by the client;
2.
clearly disclose to the client the nature of the retainer;
and
3.
indicate where the money will be deposited and how
withdrawals will be handled.
For an advance retainer agreement (deposit in the lawyer’s
business account), the agreement must include provisions #1, 2 and 3
above, and additionally must:
1. advise the client
of the option of using a security retainer; and
2. state why the
lawyer believes that an advance retainer is advantageous to the
client.
Other considerations:
1.
If there are any ambiguities in the parties’ intent, the
retainer will be construed as a security retainer and the funds must
be deposited in the client trust account.
2.
Advance payment retainers are to be used sparingly (those
circumstances in which it is in the client’s best interests as it
relates to the representation)
3.
The appropriate amount of the retainer advanced will be
determined by what is considered a reasonable fee under Rule 1.5(a).
7. Handling Credit
Card Payments for Legal Fees and Expenses
The use of credit
cards by clients to pay for legal fees and/or expenses has become
increasingly common in the last few years. While the general
consensus of authority is that lawyers may use such forms of payment
(see ABA Formal Ethics Op. 00-419 (approved the use of credit cards to pay
legal fees); ABA/BNA Lawyers’ Manual on Professional Conduct, sec.
41:601-606), when credit cards are taken for unearned fees and
expenses which must be deposited in the client trust account, the
lawyer’s duties to protect trust property are triggered. To
avoid commingling and conversion, the lawyer must carefully consider
how credit card payments will be processed (e.g.,
designation of a “merchant” account, bank services fees and
chargebacks) and take adequate precautions to protect what the
lawyer is required to maintain in trust. A number of state
ethics opinions have grappled with how a lawyer’s taking credit card
payments impacts on a lawyer’s ethical obligations.
See, e.g.,
Oregon Formal Ethics Op. 2005-172 (Aug. 2005); North
Carolina Formal Ethics Op. 2009-4 (April 2009); and Virginia Ethics
Op. 1848 (April 2009);
see also Gunnarsson, H.,
Accepting Payment by Credit Card:
Priceless?, Illinois Bar Journal (Jan. 2007).
8.
Withdrawing Earned Fees
A lawyer must promptly
withdraw funds held in the client trust account from which the
lawyer’s fees are to be withdrawn once the fees have been earned and
there is no dispute over the amount of funds to be withdrawn.
However, before fees can be withdrawn the lawyer must apprise the
client of the withdrawal and give the client a reasonable
opportunity to raise any objection. While a lawyer is not
required to remit to the client funds that the lawyer reasonably
believes represent fees owed, a lawyer may not hold funds to coerce
a client into accepting the lawyer’s contention. Therefore,
any disputed portion of the funds must be kept in a client trust
account until there is a prompt resolution of the dispute, such as
arbitration. The undisputed portion should be promptly
distributed. See Comment [3] to Rule 1.15. For
contingent fee matters, this is accomplished in the settlement
statement required by Rule 1.5(c), which shows the amount that will
go to the lawyer. For hourly-fee agreements, where the lawyer
has received a security retainer and the funds are being held in the
client trust account, the lawyer would send a billing statement
indicating the services rendered and the amount the lawyer intends
to withdraw from the client trust account unless the lawyer hears
otherwise from the client within a reasonable period of time.
In withdrawing the
undisputed portion, the lawyer should promptly write a check,
payable to the lawyer’s law firm, for the full amount of the fee
earned. The lawyer must not let earned fees accumulate in the
client trust account and withdraw fees on an “as needed” basis;
otherwise, commingling occurs, and consequently, the trust funds are
put at risk. Also, the appearance may be created that the
lawyer is hiding money in the account to avoid creditors or income
taxes thereby exposing the client trust account to possible
attachment or levy by the lawyer’s creditors.
In withdrawing earned
fees, the lawyer should make the trust check payable to the lawyer’s
law firm and indicate in the memo portion of the check the purpose
of the payment and the client matter, as well as make the
appropriate entries in the checkbook register, client ledger and
disbursement journal.
Practice Pointer – The payee on a trust check for
earned fees should be made payable to the lawyer’s law firm.
Trust checks for earned fees made payable to the lawyer’s own
creditors or made out to cash make it difficult to trace the source
and purpose of the payment and could create the appearance that the
lawyer is using the client trust account as a personal account,
thereby endangering the account’s status as a client trust account,
or that the lawyer is using client funds for personal purposes.
9.
Dealing with Unclaimed or Unidentified Funds
Situations may arise
where there is an unclaimed or unidentified amount of funds in the
client trust account due to (1) the disappearance of a client or
third person before a client trust account check could have been
issued; (2) the fact that the client trust account check has yet to
be cashed; or (3) there is an unexplained amount of money that
cannot be traced as belonging to either a client, a third person or
the lawyer. Whatever the situation, the bottom line is that
the lawyer is not entitled to take the money.
When the person to
whom trust funds are being held disappears before the lawyer has
issued a check to that person, the lawyer must first take all
reasonable steps to locate that person. See In re Walner,
119 Ill.2d 511, 519 N.E.2d 903 (1988). How much effort a
lawyer must undertake to find the missing client or third person
will vary in each case. Typically, a lawyer would check with
the post office to see if the client or third person left a
forwarding address. The lawyer would then send a letter to the
person’s last known address by regular mail and by certified return
receipt advising that person that the lawyer is holding their funds
and asking that person for direction in disbursing the money.
The lawyer may attempt to contact the person’s relatives, employers,
neighbors and friends, publish notice in places where that person
might frequent, use an investigator or check with the Social
Security Administration.
See Michigan State Bar Opinion RI-38 (November 20,
1989).
If the client or third
person cannot be located and the funds have remained unclaimed for
five years, under the Uniform Disposition of Unclaimed Property Act,
765 ILCS secs. 1025/1
et seq. (1992), the funds are presumed unclaimed and the
lawyer may remit the funds to the Illinois Unclaimed Property
Division of the Illinois State Treasurer. To report unclaimed
property to the state, contact the Office of the State Treasurer,
Unclaimed Property Division, P.O. Box 19495, Springfield, IL
62794-9495, (217) 524-0023 or go to the “Cash Dash” program on the
Illinois State Treasurer website at
www.treasurer.il.gov.
The same analysis
applies if a client trust account check was issued but had not been
cashed. The lawyer should contact the person to whom the check is
made payable at the person’s last known address, advising that
person that the client trust account check has not been cashed and
that unless that person advises the lawyer to issue a replacement
check, the funds will be presumed to be unclaimed in accordance with
the Uniform Disposition of Unclaimed Property Act and the funds will
be remitted to the Illinois Unclaimed Property Division.
Sometimes ownership of
the funds cannot be traced to either a client, a third person or the
lawyer typically due to a mathematical error. In these
situations, if the lawyer cannot determine with any reasonable
certainty if the amount left over in the account belongs to either
the lawyer or a client or third person, the funds should be treated
as unclaimed property and the lawyer should proceed as discussed
above.
10.
Bank Charges and Fees
Rule 1.15(b)
specifically provides that “[a] lawyer may deposit the lawyer's own
funds in the client trust account for the sole purpose of paying
bank service charges on that account, but only in an amount
necessary for that purpose." For an IOLTA account, the Lawyers
Trust Fund of Illinois will pay certain "[a]llowable reasonable
fees," defined in Rule 1.15(i)(8) as “per check charges, per deposit
charges, a fee in lieu of a minimum balance, federal deposit
insurance fees, automated investment ("sweep") fees, and a
reasonable maintenance fee, if those fees are charged on comparable
bank accounts maintained by non-IOLTA depositors. All other fees [e.g.,
NSF, stop payment or bank reconciliation or “special” services such
as wire transfers] are the responsibility of, and may be charged to,
the lawyer or law firm maintaining the IOLTA account.”
Practice Pointer -
Any deposits of the lawyer’s own funds to cover bank charges and
fees must be entered into and accounted for in the trust accounting
records that must be maintained. See Rule 1.15(a);
Comment [2] to Rule 1.15.
V.
Client Trust Accounting
A.
Establishing Accountability
A lawyer has the duty
to give an accurate and complete accounting to the client or third
person. See Rule 1.15(d). In order to fulfill
that duty, Rule 1.15(a) also requires that all complete records of
all client trust account funds and other property held pursuant to
Rule 1.15 are kept for seven years after the end of the
representation.
For client trust account funds, the "complete records" that must be
prepared and maintained are set forth in some detail in Rule
1.15(a)(1)-(7). There are various manual and automated
accounting systems that are available. In the first instance,
many lawyers will consult with an accountant to set up an
appropriate accounting system. Whichever accounting method or
system is used, it must be one that the lawyer understands, puts
into practice, and follows (and that others auditing the lawyer’s
account can follow).
In establishing an accounting system that meets the requirements of
Rule 1.15, the following accounting principles and the specific
account and recordkeeping requirements of Rule 1.15 should be kept
in mind:
1. Separate Clients
Should Be Thought of as Separate Accounts
With an IOLTA client
trust account, where the funds of more than one client or third
person are being held at any given time (a/k/a pooled), it is
important to keep in mind that while funds deposited in the client
trust account belong to more than one person, the lawyer must know
and account for each client or third person's funds as if each
client or third person had a separate account. Client A's
funds have nothing to do with Client B's funds. NEVER allow the
funds being held for one client or third person to be used, even
momentarily, to satisfy the obligations of another client or third
person. Separation is obtained by maintaining a separate log or
subsidiary ledger sheet for each client or third person. In this
way, the lawyer will be able to account exactly for all money
received or paid out on behalf of each client or third person at any
given time as well as know the total balance of all client and third
person funds the lawyer is required to maintain in the client trust
account. Also, for FDIC insurance to cover each client or third
person’s funds in the pooled client trust account up to the
federally insured limits, the name and ownership interest of each
client or third person must be ascertainable from the client trust
account records maintained by the lawyer. See
www.fdic.gov.
Recordkeeping
Requirement: Rule 1.15(a)(2) requires that for all
client trust accounts
contemporaneous ledger records must be prepared and maintained for
each separate trust client or beneficiary whose funds are being held
in trust. The ledger records must show for each separate trust
client or beneficiary
the source of all funds deposited, the date of each deposit, the
names of all persons for whom the funds are or were held, the amount
of such funds, the dates, descriptions and amounts of charges or
withdrawals, and the names of all persons to whom such funds were
disbursed.
2. You Can't Spend
What You Don't Have or Timing is Everything
A deposit in the
client trust account cannot be disbursed until the deposited item
has cleared the banking process and been credited to the client
trust account. The funds in the client trust account cannot be used
by anyone other than the client or third person who owns them, and
the lawyer is responsible for assuring that the funds are not, even
inadvertently, diverted to another. The rule of uncollected funds is
simply: if you write a check from the client trust account after you
have deposited a check or draft on behalf of a particular client,
but before the deposited monies have cleared the banking process and
have been credited to the client trust account, if the check is
presented, either it will bounce or you will be drawing on funds
belonging to other clients or third persons. This is considered
conversion even if the lawyer has no dishonest motive and no client
or third person is ultimately harmed. In re Clayter, 78
Ill.2d 276, 283, 399 N.E.2d 1318 (1980) Conversion is defined as any
unauthorized use of trust funds that deprives the client or third
person of the use of those funds even temporarily. See In re
Lenz, 108 Ill.2d 445, 484 N.E.2d 1093 (1985).
For example, do not
be tempted to do your client a favor by writing a check to the
client for settlement proceeds before the settlement check has
cleared on the theory that there is other money in the client trust
account. By doing so, you are putting at risk the funds of other
clients or third persons. See In re Reeves, M.R. 11056, 93 SH
599 (Ill. 1995) (lawyer suspended for, inter alia, conversion
of client funds where the lawyer would often issue a client a check
drawn on the client trust account prior to the deposited settlement
check clearing and its proceeds being posted to the client trust
account. His clients would frequently cash their checks on the same
day the client trust account check was issued and the lawyer's bank
would pay out on the check from the funds currently in the account
belonging to other clients).
Therefore, it is
important to know the financial institution’s check clearing
procedures and schedules of when funds can be withdrawn. The time it
takes for funds to become available after deposit can vary between a
day to several weeks depending on the form in which the money is
deposited. Ask your financial institution for their schedule of when
deposits are posted to the account. Many banks have automated
account information systems where you can check the activity on an
account.
Automatic Overdraft Notification Rule:
Rule 1.15(h) requires
all IOLTA and non-IOLTA client trust accounts be established at
financial institutions that have agreed to notify
the Attorney Registration and Disciplinary Commission (ARDC) when a
client trust account is overdrawn,
irrespective of whether or not the instrument is honored.
Effective September 1,
2011, Illinois joins 42 other jurisdictions that have an overdraft
notification law in place.
A bounced check drawn on a client trust
account can be an early warning that a lawyer is engaging in conduct
that could injure clients. Experience in other states demonstrates,
however, that most lawyer regulatory action under an overdraft
notification rule does not result in lawyer disciplinary charges.
Instead, the rule helps identify those lawyers who simply need
education on managing their client trust accounts.
Practice Tip:
Normally, checks will be presumed good and many financial
institutions will automatically honor and credit a deposit a certain
number of banking days after deposit without actually having
received verification from the drawee bank that the funds have been
paid. In such cases, the lawyer can safely disburse funds against
the check when the lawyer’s bank credits the deposit to the account.
However, even after an item has been posted to an account, it still
may be returned due to insufficient funds, stop payment or improper
endorsement and a lawyer may not learn of the dishonor until several
days after the item was posted. When a lawyer has any concerns that
a check might be dishonored, the safest way to determine that an
item has cleared is to call the bank upon which it is drawn to find
out if the item has been honored.
Real Estate
Transactions: Lawyers who act as the closing agents for real
estate transactions face the dilemma of the commercial necessity of
immediately issuing checks from the client trust account on funds
that have not even been deposited, much less cleared the banking
process. Rule 1.15(j) permits lawyers in the closing of a real
estate transaction to disburse funds deposited, but not yet
collected, so long as the lawyer deposited the funds into a
segregated Real Estate Funds Account (REFA), established prior to
the closing and maintained solely for the receipt and disbursement
of such funds. Also, the lawyer must either be acting as a
closing agent as prescribed in subparagraph (j)(1) or the instrument
for deposit must meet the "good-funds" requirements set forth in
subparagraph (j)(2). However, while the rule protects a lawyer
from any disciplinary consequences in this context, the rule may not
affect the lawyer’s civil liability if any deposit does not clear. See
Rule 1.15(j)(2).
3.
Always Maintain a Paper Trail
Accountability
requires that all aspects of the transaction be traceable from the
time of receipt of the funds, up to and including the disbursement
of the funds by check, proper negotiation of that check by the payee
and clearance through the banking process. In the typical
transaction, where the client gives money to the lawyer, who then
deposits it in the client trust account and pays the money out at
the direction of the client, the following documents would provide a
paper trail for the lawyer of what actions were taken:
·
the initial deposit slip or copy of a bank receipt,
which would show the date of deposit, the amount of deposit, the
name of the client or third person on whose behalf the money has
been received, the source of the funds and the date stamp showing
the date the deposit was received by the bank;
·
the bank statement, which would show that the bank
credited the deposit and when it was credited;
·
the checkbook stub, which would show when
disbursements were made and to whom;
·
the disbursement check, which would show the date it
was drawn, the amount and the name of the payee, the purpose of the
check, the order of negotiation (from the endorsements) and the date
deposited for collection;
·
the bank statement, which would show the date the
client trust account was actually charged for the check; and
·
any file documentation that would explain the deposit
or the authority for how the money should be distributed, such as a
closing statement, a court order or a signed authorization by the
client for the disbursement of funds.
Each deposit and
disbursement should describe the client or third person and the
matter to which it relates.
Recordkeeping Requirement:
Rule 1.15(a)(1)-(8) requires specific recordkeeping requirements
for all IOLTA and non-IOLTA client trust accounts. Rule
1.15(a) proscribes the following records:
Maintenance of complete records of client trust accounts
shall require that a lawyer:
(1) prepare and maintain receipt and disbursement
journals for all client trust accounts required by this
Rule containing a record of deposits and withdrawals
from client trust accounts specifically identifying the
date, source, and description of each item deposited,
and the date, payee and purpose of each disbursement;
(2) prepare and maintain contemporaneous ledger records
for all client trust accounts showing, for each separate
trust client or beneficiary, the source of all funds
deposited, the date of each deposit, the names of all
persons for whom the funds are or were held, the amount
of such funds, the dates, descriptions and amounts of
charges or withdrawals, and the names of all persons to
whom such funds were disbursed;
(3) maintain copies of all accountings, to clients or
third persons showing the disbursement of funds to them
or on their behalf, along with copies of those portions
of clients’ files that are reasonably necessary for a
complete understanding of the financial transactions
pertaining to them;
(4) maintain all client trust account checkbook
registers, check stubs, bank statements, records of
deposit, and checks or other records of debits;
(5) maintain copies of all retainer and compensation
agreements with clients;
(6) maintain copies of all bills rendered to clients for
legal fees and expenses;
(7) prepare and maintain reconciliation reports of all
client trust accounts, on at least a quarterly basis,
including reconciliations of ledger balances with client
trust account balances;
(8) make appropriate arrangements for the maintenance of
the records in the event of the closing, sale,
dissolution, or merger of a law practice.
Those records may be maintained by electronic, photographic, or
other media provided that printed copies can be produced and the
records are readily accessible to the lawyer.
4.
There is No Such Thing as a Negative Balance
All balances are
either positive (while monies are being held for clients) or zero
(when the matter is closed and no monies remain in the client trust
account). The balance in the client trust account should
always equal the aggregate balance due all clients. In re
Young, 111 Ill.2d 98, 488 N.E.2d 1014 (1986). If a
negative balance occurs, it is, at best, a sign of negligence and,
at worst, a sign of theft.
B.
Essential Accounting Systems
Rule 1.15
requires lawyers to do more than just deposit client or third
person funds into a separate and identifiable client trust
account. The lawyer also has the duty to give an accurate
and complete accounting to the client or third person concerning
how their property was handled by the lawyer. Rule
1.15(a)(1) through (7) sets forth the accounting records or
books listed below that must be maintained for funds held in the
client trust account. Trust account records
required under the rule can be kept manually or electronically
through some type of accounting software program so long
as printed copies can be produced and the records are readily
accessible to the lawyer. See Rule 1.15(a).
There are
various manual and automated accounting systems that are
available. In the first instance, many lawyers will
consult with an accountant to set up an appropriate accounting
system. Basic accounting journals and forms that can be
used as guides, as well as a form reconciliation report can be
downloaded from the ARDC website at
https://www.iardc.org/SampleRecordkeeping Forms.html.
For records kept manually, the lawyer must record each trust
account transaction a number of different times. For example,
for a trust account
check, the lawyer would
have to prepare the check, enter the check into the check register,
enter the check in the subsidiary client ledger, and enter the
check in the
disbursement journal.
In comparison,
the use of computer software for trust accounting permits the
lawyer to only make one computer entry and the software will
enter the information into the correct ledgers and journals
assuming the software is properly setup that way. This
ensures that all the required journal entries are up-to-date and
saves time for the lawyer. While a
lawyer can purchase software specifically designed for
attorney trust accounting, two commonly used, generic accounting
programs that can be modified to provide the necessary trust
account records are Quicken® and QuickBooks.
The Minnesota Lawyers Professional Responsibility Board and the
Minnesota Office of Lawyers Professional Responsibility have
a publication explaining how to set up attorney trust accounting
records on Quicken®:
Maintaining Lawyer Trust Accounts with Quicken 2006 Basic.
Additional common
trust accounting software resources can be found on the ARDC
website at
https://www.iardc.org/Trust Account Software Resources.htm.
Whichever
accounting system is used it must be one that the lawyer
understands, puts into practice, and follows (and that others
auditing the lawyer’s account can follow).
Required Journals: Rule 1.15(a) requires the following
journals must be prepared and maintained, either manually or
computerized, for all IOLTA and non-IOLTA client trust accounts:
1.
Receipts and Disbursement Journals - Rule 1.15(a)(1). These
journals lists all receipts and disbursements chronologically for
all amounts being held in trust that sufficiently identifies the
date, source and purpose of each transaction.
TRUST ACCOUNT
RECEIPTS JOURNAL
TRUST ACCOUNT NO. ____________________
ACCOUNT NAME: _________________
FINANCIAL INSTITUTION ____________________
|
|
DATE |
SOURCE |
CLIENT |
CASE/FILE NO. |
AMOUNT OF DEPOSIT |
TOTAL DAILY BALANCE |
| |
|
|
|
|
|
| |
|
|
|
|
|
TRUST ACCOUNT
DISBURSEMENTS JOURNAL
TRUST ACCOUNT NO. ____________________
ACCOUNT NAME: _________________
FINANCIAL INSTITUTION ____________________
|
|
DATE |
CHECK NO. |
PAYEE |
PURPOSE |
CLIENT |
CASE/FILE NO. |
AMOUNT |
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
2. Client Ledger
Pages - Rule 1.15(a)(2). This ledger records chronologically for
each client or third person for whom funds are held in trust all
receipts, disbursements and balances. Without a subsidiary
ledger the lawyer would likely be unable to know the amount of funds
that must be maintained for a given client or third person and to
provide an accurate and complete accounting on request. Also,
the FDIC insurance rules require that to fully insure each client’s
or third person’s funds being held in the IOLTA client trust
account, each client and third person’s interests must be
ascertainable from the client trust account records. See
discussion on Pages 17-18. Each subsidiary ledger would
include:
-
Separate subsidiary ledger pages for each client or third
person for whom funds are held in trust.
-
Posting transactions (receipts and disbursements) by date,
purpose and amount.
-
If the client trust account is opened for the benefit of one
client or third person or if the account allocates interest to each
client or third person, any net interest (accrued interest less
service charges) credited to the client or third person.
|
TRUST
ACCOUNT CLIENT LEDGER PAGE
Name of Client/Third
Person:
_____________________________________
Legal Matter/Adverse Party: ___________________________
File or Case Number: ________________________________
|
|
DATE |
DESCRIPTION
OF TRANSACTION |
PAYOR/PAYEE |
CHECK NO. |
FUNDS
PAID |
FUNDS
RECEIVED |
BALANCE |
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
3.
Checkbook Register - Rule 1.15(a)(4). A client trust
account checkbook register is like any other checkbook register.
It is used to record deposits and client trust account checks in
sequential order and is also used to maintain a running balance.
To properly maintain the checkbook register,
check stubs, bank statements, records of deposit, and checks or
other records of debits must also be maintained.
|
TRUST
ACCOUNT CHECKBOOK
REGISTER
TRUST ACCOUNT NO. ____________________
ACCOUNT NAME: _________________
FINANCIAL INSTITUTION ____________________
|
|
DATE |
CHECK NO. |
PAYEE
OR DEPOSIT SOURCE |
CASE/FILE NO. |
AMOUNT
OF CHECK |
AMOUNT OF DEPOSIT
|
TOTAL DAILY BALANCE |
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
4. Reconciliation Report - Rule
1.15(a)(7).
Prepare and maintain reconciliation reports of all client trust
accounts, on at least a quarterly basis, including reconciliations
of ledger balances with client trust account balances.
The following three
balances should be the same and equal to the bank statement (less
for outstanding checks & net interest for IOLTA accounts, plus
in-transit deposits).
TRUST ACCOUNT RECONCILIATION
REPORT
PERIOD OF ________ to __________
TRUST ACCOUNT NO. ____________________
ACCOUNT NAME: _________________
FINANCIAL INSTITUTION
____________________
Checkbook
Balance:______________________
Receipts Minus Disbursement
Journals
Balance:__________________________
Subsidiary Ledger Pages Balance:_____________________
Bank Statement
Balance on ______
Plus outstanding deposits
_______
Less nest interest accrued
_______
Less outstanding checks
______
Adjusted Bank Statement
Balance:_________________
Required Copies of Account Records: In addition to
preparing and maintaining the above journals, Rule 1.15(a) requires
that copies of the following records generated in operating the
client trust account be maintained:
-
copies of all accountings, to clients or third persons
showing the disbursement of funds to them or on their
behalf, along with copies of those portions of clients’
files that are reasonably necessary for a complete
understanding of the financial transactions pertaining
to them - Rule 1.15(a)(3);
-
copies of all retainer and compensation agreements with
clients - Rule 1.15(a)(5); and
-
copies of all bills rendered to clients for legal fees
and expenses - Rule 1.15(a)(6).
All of the books and records required by Rule 1.15(a) must be
maintained for a period of seven years after termination of
the representation. The records can be maintained by
electronic, photographic or other media provided that printed copies
can be produced and the records are readily accessible to the
lawyer.
In addition, Rule 1.15(a)(8) requires a lawyer to make
make "appropriate arrangements" for the maintenance of the records
in the event of the closing, sale, dissolution, or merger of a law
practice. See also Comment [5] to Rule 1.3 (duty of diligence may
require sole practitioner to a successor plan in place in the event
of death or disability).
C. Tracking
Client Trust Account Funds: Record Entries
1.
Depositing Client Trust Account Funds
Deposit client funds in the client trust account promptly
upon receipt. Generate the following:
a.
Deposit slip (receipt for cash), which identifies client or file for
whom deposit is being made;
b.
Checkbook register deposit entry;
c.
Subsidiary ledger entry; and
d.
Cash receipts journal entry.
Checks payable jointly to the client and the lawyer should be
deposited in the client trust account and not endorsed over to the
client.
2.
Disbursing Client Trust Account Funds
Disbursements to the client or on behalf of the client must
be made promptly after the deposit has been credited. Generate
the following:
a.
Check made payable to the client or third party, with notation of
the client matter and purpose in memo portion of the check;
b.
Checkbook register disbursement entry;
c.
Subsidiary ledger entry; and
d.
Cash disbursements journal entry.
3.
Proper Methods For Withdrawing Legal Fees
Before an earned legal fee may properly be withdrawn from a
client trust account, the client should be given notice of the
nature of the services rendered and the amount of the legal fee
proposed to be paid to the lawyer. See In re Smith, 63
Ill.2d 250, 347 N.E.2d 133 (1976). If no objection is received
within a reasonable time, the lawyer may withdraw the fee from the
client trust account.
Moreover, if no dispute over the fee exists, the lawyer’s
fees which are justly due and owing, may not remain in the client
trust account, but MUST be promptly withdrawn. See
Comment [3] to Rule 1.15. If not, the lawyer is commingling
his or her own funds with the clients' funds and, as a consequence,
is endangering the integrity of the client trust account.
See In re Enstrom, 104 Ill.2d 410, 472 N.E.2d 446 (1984).
Disbursements out of
the client trust account for earned legal fees should be made
payable to the lawyer and not to a third party creditor of the
lawyer. Otherwise, a lawyer creates the appearance of using
the client trust account for the lawyer's own personal or business
expenses. This could potentially subject the client trust
account to attachment by the lawyer's creditors, thereby endangering
existing client funds and the status of the account as a client
trust account.
4.
Reconciling Account Records with Monthly Bank Statements
Rule 1.15(a)(7) requires that reconciliations must be made for all
IOLTA and non-IOLTA client trust accounts, on at least a quarterly
basis, including reconciliations of ledger balances with client
trust account balances.
Before a client trust
account can be reconciled with the monthly bank statement, the
balances of:
-
the cash receipts and cash disbursement journals;
-
the subsidiary ledger pages; and
-
the checkbook register
must equal one another.
Step 1: Add together the monthly ending balances of all
subsidiary ledger pages.
Step 2: Take
the figure you arrived at the previous month when you reconciled
your cash receipts and cash disbursements journals. Add the
cash receipts journal balance for the month in question and subtract
the cash disbursements journal balance for that month.
Step 3: Take
the balance in the checkbook register at the end of the month in
question.
The figures for Step
1, 2, and 3 must be equal. If they are not, look for entries
that do not match or addition or subtraction errors, until all three
figures are the same.
5.
Interest and Bank Costs
a.
For IOLTA accounts, interest credits are paid by the financial
institution directly to the Lawyers Trust Fund of Illinois, and
certain legitimate and reasonable bank costs are paid by the Lawyers
Trust Fund directly to the bank. If your monthly bank
statement reflects interest credited but not yet paid out to the
Lawyers Trust Fund or bank charges not yet paid by the Lawyers Trust
Fund, you should adjust the balance shown on the monthly bank
statement accordingly. The interest and the charges should not
be entered on your ledgers, cash journals, or checkbook register.
b.
For non-IOLTA client trust accounts, where the interest is credited
to individual clients or beneficiaries, after bank costs are
deducted, you will not adjust the balance shown on the bank
statement, but you must add the net interest to your subsidiary
ledger pages, your cash receipts journal, and your checkbook
register.
6. Monthly
client trust account reconciliation.
The bank statement balance must reconcile with the other
ledger balances as follows:
a.
Take the balance shown on the monthly bank statement. (For
IOLTA accounts, that balance may have to be adjusted as discussed in
(5)(a) above.)
b.
Add any deposits not credited on the bank statements.
c.
Subtract checks not debited on the bank statement.
d.
The balance should be equal to the three balances described in Step
1, 2 and 3 on Page 40 -- the subsidiary ledger pages balance, the
cash disbursements and receipts journals balance, and the checkbook
register balance.
Practice Tips:
·
Have an Accounting System - You must have a way
of accounting to a client or third persons as to how their funds
were handled. Rule 1.15 does not prescribe any particular accounting
system or method but does mandate that specific recordkeeping be
performed and specific records be maintained as set forth in Rule
1.15(a)(1)-(8). Some common accounting record systems are discussed
below. However, you must have a system that you and anyone else
looking at your records can understand. If you don’t know how to set
up an accounting system, consult with an accountant. See In re
Sebela, M.R. 10859, 92 CH 577 (Ill. 1995) (conversion of client
funds occurred because lawyer had no accounting system, withdrew his
fees on an "as needed" basis based on his memory and, consequently,
paid himself more than what he was entitled).
·
Reconcile Monthly - You should have a practice
where you reconcile all of your accounts on a monthly basis,
regardless of whether you do your own accounting or you have someone
assisting you. Rule 1.15(a)(7) requires that reconciliations for
IOLTA and non-IOLTA client trust accounts be performed at least on a
quarterly basis and that records of those reconciliations be
maintained. If you fail to reconcile, you may not be aware of
bank errors, miscalculations and employee embezzlement. See
discussion on Page 40.
·
Don’t Share Client Trust Accounts With Lawyers Not
in the Same Firm - A lawyer has a non-delegable fiduciary duty
to safeguard client or third person property entrusted to the lawyer
during a representation. If you are in a law firm, each lawyer in
the law firm need not open up a separate client trust account for
each lawyer in the firm. However, you must not allow lawyers that
are not in your law firm to deposit trust funds into the law firm’s
client trust account; you are responsible for those funds.
Conversely, if you deposit funds entrusted to you by a client or
third person for safekeeping, you cannot deposit those funds into
another lawyer’s client trust account.
·
Do Not Withdraw Your Fees in the Form of Trust
Checks Payable for Your Own Personal Expenses - Only client
related charges, such as court costs, expert witness fees or
lawyers’ fees, may be paid out of the client trust account. The
lawyer should not withdraw earned fees from the client trust account
in the form of trust checks payable to the lawyer’s own creditors.
An earned fee must be withdrawn promptly from the client trust
account and deposited in the lawyer's own personal or business
account. For example, a trust check made payable to the gas or
electric company to pay the lawyer's gas or electric bill creates
the appearance that the lawyer is using the client trust account as
a personal account and thereby endanger its status as a client trust
account, or that the lawyer is using client funds for personal
purposes.
·
Withdraw Your Fees Promptly from the Client Trust
Account Once You have Earned Them - When a fee has been earned,
the lawyer must promptly write a check, payable to the lawyer or the
lawyer's law firm, for the full amount of the fee earned. The
lawyer must not let earned fees accumulate in the client trust
account and withdraw fees on an "as needed" basis; otherwise,
commingling occurs and, consequently, the trust funds are put at
risk. Also, the appearance is created that the lawyer is
hiding money in the account to avoid creditors or income taxes.
In which case, the client trust account could be subject to
attachment or levy by the lawyer's creditors.
·
Avoid ATM Withdrawals - Because the lawyer has
a duty to account to the client or third person as to how the trust
property was handled, writing a check from the client trust account
creates an automatic audit trail that makes it easy to trace who the
money came from and where it went. A client trust account with ATM
access makes it possible for a lawyer and anyone else with the
access code to withdraw the client’s money in cash and it is very
hard to account for cash. ATMs can be an audit trail disaster. With
an ATM withdrawal, the only record of what happened to the money is
a little slip of paper that shows the date and the amount of the
withdrawal; there is nothing that shows which client’s or third
person’s money was withdrawn, who withdrew it or to whom the money
was paid. ATM withdrawals are a bad practice for all purposes,
including withdrawing lawyers’ fees, since there is no paper trail
recording the case from which the fees are owed. Even if you put all
the descriptive information on an ATM receipt, it is not good proof
of what happened to the money if there is an ARDC investigation.
·
Let Deposits Clear Before Writing Checks - The
important thing to remember is that disbursing funds before the
deposit has cleared puts the funds of other clients or third persons
at risk of loss, thereby resulting in conversion.
Also, if there are insufficient funds at the time the trust check is
presented for payment, the trust check will be dishonored and the
financial institution will report the overdraft to the ARDC,
irrespective of whether or not the trust check is honored.
See
discussion “You Can’t Spend What You Don’t Have or Timing is
Everything” on Page 33.
·
If a Mistake Happens, Don’t Panic - If you find
that an error occurred in making calculations or deposits, don’t
panic. Take remedial action. Call your financial institution.
Failure to act not only may compound the problem but failure to
notify the financial institution of any errors, forgeries,
unauthorized signatures or alterations within a certain period of
time may waive all claims that you may have against the financial
institution regarding these problems.
7.
Retention of Records
"Complete records" of all client trust account funds and other
property maintained in trust pursuant to Rule 1.15 must be kept by
the lawyer for a period of seven years after termination of the
representation under Rule 1.15(a). "Complete records" for all
trust funds held in IOLTA and non-IOLTA client trust accounts that
must be maintained is set forth in Rule 1.15(a)(1)-(8).
Rule 1.15(a)
expressly allows the records required under the rule to be
maintained by electronic, photographic, or other media provided that
printed copies can be produced, and the records are readily
accessible to the lawyer.
Also, under Supreme
Court Rule 769(2), all financial records related to a lawyer's
practice of law must also be maintained for a minimum of seven years
after the fiduciary obligation ends. Financial records
include, but are not limited to, bank statements, time and billing
records, checks, check stubs, journals, ledgers, audits, financial
statements, tax returns and tax reports. Under the
rule, the records maintained can be originals, copies, or
computer-generated images. If a computer accounting software
package is used for the client trust accounting, to guard against
the potential loss of such computer-stored data, some experts
suggest that you print out a hard copy of the accounting records on
a monthly basis. Also, it is suggested that the data is backed
up on a regular basis.
VI. Sample Client Trust Account
Transactions, Trust Account Trial Balances and Trust Account
Reconciliation
A.
Sample Client Trust Account Transactions
Julia Dolan is a sole
practitioner. On January 31, 2010, the bank statement balance
for Dolan's IOLTA client trust account is $10,241.66. These
funds are identified as follows:
a.
$10,000 represents escrow money which was deposited into Dolan's
client trust account on January 1, 2010, on behalf of her client Ron
Roper.
b.
$200 represents funds of Julia Dolan which were deposited into the
client trust account in order to maintain a minimum balance
necessary to avoid bank service charges.
c.
$41.66 represents the interest credited for the month of January
which has yet to be paid by the bank to IOLTA.
The only subsidiary
ledger pages with outstanding balances on January 31, 2010, are
those for Roper and Dolan. Because this is an IOLTA account,
the interest figure ($41.66) does not appear on the subsidiary
ledger.
SUBSIDIARY LEDGER PAGE
CLIENT TRUST ACCOUNT NO. 123-456
Name of Client:
Ron Roper
Legal Matter/Adverse Party:
Real Estate Escrow-Hadley
File or Case Number:
10-161
|
DATE |
DESCRIPTION
OF
TRANSACTION |
CHECK |
FUNDS
PAID |
FUNDS.
RECEIVED |
BALANCE |
|
01/01/10 |
Deposit-Escrow |
|
|
$10,000 |
$10,000 |
SUBSIDIARY LEDGER PAGE
CLIENT TRUST ACCOUNT NO. 123-456
Name of
Client: Julia Dolan, Attorney
at Law
Legal Matter/Adverse Party:
None
File or Case Number:
None
|
DATE |
DESCRIPTION
OF
TRANSACTION |
CHECK |
FUNDS
PAID |
FUNDS.
RECEIVED |
BALANCE |
|
01/01/09 |
Minimum balance
amount to avoid
service charge |
|
|
$200 |
$200 |
On February 1, 2010, Joan Smith, a
client, gives Dolan a $1000 retainer. The fee agreement with
Smith provides that the retainer is a security retainer to be placed
in the client trust account and withdrawn as earned.
SUBSIDIARY LEDGER PAGE
CLIENT TRUST ACCOUNT NO. 123-456
Name of Client: Joan Smith
Legal Matter/Adverse Party: Marital Dissolution
File or Case Number: 10-1057
|
DATE |
DESCRIPTION
OF
TRANSACTION |
CHECK |
FUNDS
PAID |
FUNDS.
RECEIVED |
BALANCE |
|
02/01/10 |
Retainer-Smith |
|
|
$1,000 |
$1,000 |
CASH RECEIPTS JOURNAL
CLIENT TRUST ACCOUNT NO. 123-456
FEBRUARY 2010
|
DATE |
SOURCE |
CLIENT |
DEPOSIT |
AMOUNT |
|
02/01/10 |
Smith Check #2398 |
Joan Smith |
50062 |
$1,000 |
On February 5, 2010, client James Johnson is ordered to endorse his
federal and state tax refunds of $2,000 and deposit them into
Dolan's client trust account. The refunds will be distributed
upon further order of the court.
SUBSIDIARY LEDGER PAGE
CLIENT TRUST ACCOUNT NO. 123-456
Name of Client:
James Johnson
Legal Matter/Adverse Party:
Dissolution
File or Case Number:
09-1058
|
DATE |
DESCRIPTION
OF
TRANSACTION |
CHECK |
FUNDS
PAID |
FUNDS.
RECEIVED |
BALANCE |
|
02/05/10 |
Red/State Refund |
|
|
$2,000 |
$2,000 |
CASH RECEIPTS JOURNAL
CLIENT TRUST ACCOUNT NO. 123-456
FEBRUARY 2010
|
DATE |
SOURCE |
CLIENT |
DEPOSIT |
AMOUNT |
|
02/01/10 |
Smith Check #2398 |
Joan Smith |
50062 |
$1,000 |
|
02/05/10 |
Fed/State Refund |
James Johnson |
50145 |
$2,000 |
On February 13, 2010,
Dolan receives a settlement check in the amount of $15,000 from Ace
Insurance Company for her client Bill Grey. Dolan prepares a
written settlement statement, in accordance with the terms of the
written contingent fee agreement and Rule 1.5(c):
Personal Injury
Settlement Statement
Bill Grey vs. Ace Insurance Co.
Settlement Amount from Ace Insurance Co.
$15,000.00
Court Reporter Inc.
$400.00
Process Server Inc.
$ 60.00
Dr. Bailey, Expert
$340.00
Total Expenses
$800.00
Attorney Fees (1/3 gross rec.)
$ 5,000.00
Amount Due Bill Grey
$ 9,200.00
On February 20, 2010, Dolan makes the disbursements in
accordance with the settlement statement after allowing seven days
for the insurance company check to clear.
SUBSIDIARY LEDGER PAGE
CLIENT TRUST ACCOUNT NO. 123-456
Name of Client:
Bill Greyz
Legal Matter/Adverse Party: Personal
Injury-Ace Ins. Co.
File or Case Number: 05-1002
|
DATE |
DESCRIPTION OF TRANSACTION |
CHECK |
FUNDS PAID |
FUNDS RECEIVED |
BALANCE |
|
02/13/10 |
Ace Insurance Co. |
|
|
$15,000 |
$15,000 |
|
02/20/10 |
Court Reporter Inc. |
1005 |
$400 |
|
$14,600 |
|
02/20/10 |
Process Server Inc. |
1006 |
$60 |
|
$14,540 |
|
02/20/10 |
Dr. Bailey |
1007 |
$340 |
|
$14,200 |
|
02/20/10 |
Bill Grey |
1008 |
$9,200 |
|
$5,000 |
|
01/20/10 |
Julia Dolan-Fees |
1009 |
$5,000 |
|
$0 |
CASH RECEIPTS JOURNAL
CLIENT TRUST ACCOUNT NO. 123-456
FEBRUARY 2010
|
DATE |
SOURCE |
CLIENT |
DEPOSIT |
AMOUNT |
|
02/01/10 |
Smith Check #2398 |
Joan Smith |
50062 |
$1,000 |
|
02/05/10 |
Fed/State Refund |
James Johnson |
50145 |
$2,000 |
|
02/13/10 |
Ace Insurance Co. |
Bill Grey |
62001 |
$15,000 |
CASH DISBURSEMENTS JOURNAL
CLIENT TRUST ACCOUNT NO. 123-456
FEBRUARY 2010
|
DATE |
CHECK |
PAYEE |
PURPOSE |
CLIENT |
AMOUNT |
|
02/20/10 |
1005 |
Court Reporter Inc. |
Costs |
Grey |
$400 |
|
02/20/10 |
1006 |
Process Server Inc. |
Costs |
Grey |
$60 |
|
02/20/10 |
1007 |
Dr. Bailey |
Costs |
Grey |
$340 |
|
02/20/10 |
1008 |
Bill Grey |
Settlement |
Grey |
$9,200 |
|
02/20/10 |
1009 |
Julia Dolan |
Fees |
Grey |
$5,000 |
On February 21, 2010, the court orders
that $1,500 be paid to Johnson's wife from the escrowed income tax
refunds.
SUBSIDIARY LEDGER PAGE
CLIENT TRUST ACCOUNT NO. 123-456
Name of Client:
James Johnson
Legal Matter/Adverse Party:
Dissolution
File or Case Number: 03-1058
|
DATE |
DESCRIPTION
OF
TRANSACTION |
CHECK |
FUNDS
PAID |
FUNDS.
RECEIVED |
BALANCE |
|
02/05/10 |
Red/State Refund |
|
|
$2,000 |
$2,000 |
|
02/21/10 |
Mrs. James Johnson |
1010 |
$1,500 |
|
$500 |
CASH DISBURSEMENTS JOURNAL
CLIENT TRUST ACCOUNT NO. 123-456
FEBRUARY 2010
|
DATE |
CHECK |
PAYEE |
PURPOSE |
CLIENT |
AMOUNT |
|
02/20/10 |
1005 |
Court Reporter Inc. |
Costs |
Grey |
$400 |
|
02/20/10 |
1006 |
Process Server Inc. |
Costs |
Grey |
$60 |
|
02/20/10 |
1007 |
Dr. Bailey |
Costs |
Grey |
$340 |
|
02/20/10 |
1008 |
Bill Grey |
Settlement |
Grey |
$9,200 |
|
02/20/10 |
1009 |
Julia Dolan |
Fees |
Grey |
$5,000 |
|
02/21/10 |
1010 |
Mrs. J. Johnson |
Ct. Order |
Johnson |
$1,500 |
On February 28, 2010, Dolan is retained
by Sam Spade and paid a $5,000 retainer which under the fee
agreement is to be deposited in the client trust account and
withdrawn as earned.
SUBSIDIARY LEDGER PAGE
CLIENT TRUST ACCOUNT NO. 123-456
Name of
Client: Sam Spade
Legal Matter/Adverse Party:
Business Litigation-Olson
File or Case Number:
10-1096
|
DATE |
DESCRIPTION
OF
TRANSACTION |
CHECK |
FUNDS
PAID |
FUNDS.
RECEIVED |
BALANCE |
|
02/28/10 |
Retainer |
|
|
$5,000 |
$5,000 |
CASH RECEIPTS JOURNAL
CLIENT TRUST ACCOUNT NO. 123-456
FEBRUARY 2010
|
DATE |
SOURCE |
CLIENT |
DEPOSIT |
AMOUNT |
|
02/01/10 |
Smith Check #2398 |
Joan Smith |
50062 |
$1,000 |
|
02/05/10 |
Fed/State Refund |
James Johnson |
50145 |
$2,000 |
|
02/13/10 |
Ace Insurance Co. |
Bill Grey |
62001 |
$15,000 |
|
02/28/10 |
Spade Retainer |
Sam Spade |
64662 |
$5,000 |
On February 28, 2010, Dolan bills Joan Smith $250 for court costs
paid by Dolan on Smith's behalf during February and issues a client
trust account check for that amount made payable to herself.
SUBSIDIARY LEDGER PAGE
CLIENT TRUST ACCOUNT NO. 123-456
Name of Client:
Joan Smith
Legal Matter/Adverse Party:
Marital Dissolution
File or Case Number:
10-1057
|
DATE |
DESCRIPTION
OF
TRANSACTION |
CHECK |
FUNDS
PAID |
FUNDS.
RECEIVED |
BALANCE |
|
01/01/10 |
Retainer-Smith |
|
|
$1,000 |
$1,000 |
|
02/28/10 |
Costs- J. Dolan |
1011 |
$250 |
|
$750 |
CASH DISBURSEMENTS JOURNAL
CLIENT TRUST ACCOUNT NO. 123-456
FEBRUARY 2010
|
DATE |
CHECK |
PAYEE |
PURPOSE |
CLIENT |
AMOUNT |
|
02/20/10 |
1005 |
Court Reporter Inc. |
Costs |
Grey |
$400 |
|
02/20/10 |
1006 |
Process Server Inc. |
Costs |
Grey |
$60 |
|
02/20/10 |
1007 |
Dr. Bailey |
Costs |
Grey |
$340 |
|
02/20/10 |
1008 |
Bill Grey |
Settlement |
Grey |
$9,200 |
|
02/20/10 |
1009 |
Julia Dolan |
Fees |
Grey |
$5,000 |
|
02/21/10 |
1010 |
Mrs. J. Johnson |
Ct. Order |
Johnson |
$1,500 |
|
02/28/10 |
1011 |
Julia Dolan |
Costs |
J. Smith |
$250 |
B.
Sample Client Trust Account Trial
Balances
Before Dolan's IOLTA
client trust account can be reconciled, the checkbook register, the
cash balance and the subsidiary ledger pages must balance.
1.
Checkbook Register Balance. On February 1, 2010,
Dolan's checkbook register balance is $16,450.
CHECKBOOK REGISTER
|
CHECK |
DATE |
PAYEE OR
DEPOSIT
SOURCE |
AMOUNT OF CHECK |
DEPOSIT
AMOUNT |
BALANCE |
|
|
01/31/10 |
Balance |
|
|
$10,200 |
|
|
02/01/10 |
Joan Smith |
|
$1,000 |
$11,200 |
|
|
02/05/10 |
Johnson Tax Ref |
|
$2,000 |
$13,200 |
|
|
02/13/10 |
Ace. Ins. Co. |
|
$15,000 |
$28,200 |
|
1005 |
02/20/10 |
Court Reporter |
$400 |
|
$27,800 |
|
1006 |
02/20/10 |
Process Server |
$60 |
|
$27,740 |
|
1007 |
02/20/10 |
Dr. Bailey |
$340 |
|
$27,400 |
|
1008 |
02/20/10 |
Bill Grey |
$9,200 |
|
$18,200 |
|
1009 |
02/20/10 |
Julia Dolan |
$5,000 |
|
$13,200 |
|
1010 |
02/21/10 |
Mrs. Johnson |
$1,500 |
|
$11,700 |
|
|
02/28/10 |
Sam Spade |
|
$5,000 |
$16,700 |
|
1011 |
02/28/10 |
Julia Dolan |
$250 |
|
$16,450 |
2.
Subsidiary Ledger Pages Trial Balance. Dolan's
subsidiary ledger pages trial balance for February is calculated by
totaling all of the subsidiary ledger pages that have an outstanding
balance on February 28, 2010.
SUBSIDIARY LEDGER
TRIAL BALANCE
PERIOD OF 02/1/10 - 02/28/10
CLIENT TRUST ACCOUNT NO. 123-456
CLIENT
|
BALANCE ON 02/28/10 |
|
Julia Dolan |
$200 |
|
Ron Roper |
$10,000 |
|
Joan Smith |
$750 |
|
James Johnson |
$500 |
|
Sam Spade |
$5,000 |
|
Trial Balance Total |
$16,450 |
3.
Cash Balance. Dolan's cash balance for February is calculated
by taking the cash balance from January and adding the total
February receipts and subtracting the total February disbursements.
CASH RECEIPTS JOURNAL
CLIENT TRUST ACCOUNT NO. 123-456
FEBRUARY 2010
|
DATE |
SOURCE |
CLIENT |
DEPOSIT |
AMOUNT |
|
02/01/10 |
Smith Check #2398 |
Joan Smith |
50062 |
$1,000 |
|
02/05/10 |
Fed/State Refund |
James Johnson |
50145 |
$2,000 |
|
02/13/10 |
Ace Insurance Co. |
Bill Grey |
62001 |
$15,000 |
|
02/28/10 |
Spade Retainer |
Sam Spade |
64662 |
$5,000 |
|
03/01/10 |
|
FEBRUARY TRIAL |
|
$23,000 |
CASH DISBURSEMENTS JOURNAL
CLIENT TRUST ACCOUNT NO. 123-456
FEBRUARY 2010
DATE
|
CHECK |
PAYEE |
PURPOSE |
CLIENT |
AMOUNT |
|
02/20/10 |
1005 |
Court Reporter Inc. |
Costs |
Grey |
$400 |
|
02/20/10 |
1006 |
Process Server Inc. |
Costs |
Grey |
$60 |
|
02/20/10 |
1007 |
Dr. Bailey |
Costs |
Grey |
$340 |
|
02/20/10 |
1008 |
Bill Grey |
Settlement |
Grey |
$9,200 |
|
02/20/10 |
1009 |
Julia Dolan |
Fees |
Grey |
$5,000 |
|
02/21/10 |
1010 |
Mrs. J. Johnson |
Ct. Order |
Johnson |
$1,500 |
|
02/28/10 |
1011 |
Julia Dolan |
Costs |
J. Smith |
$250 |
|
03/01/10 |
|
|
FEBRUARY TRIAL |
|
$16,750 |
CASH BALANCE
PERIOD OF 02/01/10 – 02/28/10
CLIENT TRUST ACCOUNT NO. 123-456
Cash Balance from January
$10,200
Plus February Receipts
$23,000
Minus February Disbursements
($16,750)
February Cash Balance
$16,450
4.
February Trial Balances. The checkbook register balance, cash
balance, and subsidiary ledger pages trial balance must be
identical.
Checkbook Register
Balance
$16,450
Cash Balance
$16,450
Subsidiary Ledger Pages Trial Balance
$16,450
C.
Sample Monthly Client Trust
Account Reconciliation
After the checkbook
register, cash balance, and subsidiary ledger pages have been
balanced, the February bank statement is reconciled with the
February trial balances figure (i.e., $16,450).
Julia Dolan
Attorney at Law
IOLTA Trust Account
125 Practice Avenue
New Justice, IL 00000-0000
ACCOUNT NUMBER: 123-456
CHECKING ACCOUNT SUMMARY FOR
02/01/10 THRU 02/28/10
OPENING
WITHDRAWLS
SERVICE
CLOSING
BALANCE
DEPOSITS
INTEREST
& CHECKS
CHARGE
BALANCE
$10,241.66
$18,000.00
$62.50
$16,451.66
$0.00
$11,852.50
u
u
u
u
u
u
u
u
u
u
u
u
u
u
u
u
u
u
u
u
u
u
CHECKING ACCOUNT TRANSACTIONS
DEPOSITS
DATE
AMOUNT
50062
02/01/10
$ 1,000.00
50145
02/05/10
$ 2,000.00
62001
02/13/10
$15,000.00
Net Interest For February
02/28/10
$ 62.50
WITHDRAWALS
DATE
AMOUNT
Net Interest paid to IOLTA for
January
02/28/10
$ 41.66
CHECKS
BALANCES
ITEM
DATE
AMOUNT
DATE
BALANCE
1005
02/25/10
$ 400.00
02/06/10
$13,241.66
1006
02/24/10
$ 60.00
02/13/10
$28,241.66
1008*
02/21/10
$ 9,200.00
02/26/10
$12,081.66
1009
02/23/10
$ 5,000.00
02/28/10
$11,852.50
1010
02/26/10
$ 1,500.00
1011
02/28/10
$ 250.00
* denotes gap in check sequence
The bank statement
balance is reconciled with the trial balances figure by adding: (1)
any outstanding deposits; and by subtracting: (2) net interest
accrued, and any outstanding checks. (Accrued interest is
subtracted because it will be paid directly to IOLTA and will thus
never be added to the checkbook balance or the journal or ledger
pages balance. (See discussion at Page 41.) In this
example, the bank statement and the checkbook register reflect that
check number 1007 in the amount of $340 is outstanding and that the
$5,000 Spade deposit has not yet been credited. There are no
monthly service charges and the interest accrued figure is taken
from the bank statement.
MONTHLY RECONCILIATION
PERIOD OF 02/01/10 - 02/28/10
CLIENT TRUST ACCOUNT NO. 123-456
Checkbook Balance
$16,450.00
Cash Balance From Journals
$16,450.00
Subsidiary Ledger Pages Trial
Balance
$16,450.00
Bank Statement
Balance on 02/28/10
$11,852.50
Plus outstanding
deposits
$ 5,000.00
Less net interest
accrued
($ 62.50)
Less outstanding
checks
($ 340.00)
Adjusted Bank Statement Balance
$16,450.00
All of the records
discussed above must be kept for a period of seven years after
termination of the representation. The foregoing sample is
used to illustrate the typical daily procedures necessary to
maintain proper client trust account records. Lawyers may
consult with a reputable accountant to help them set up an
accounting system that they can understand and follow.
B.
Sample Trust Account Record Forms
Trust Account Receipts Journal
- Rule 1.15(a)(1)
Lists alls receipts chronologically for all deposits in the
trust account and identifies the date and source of each receipt
Trust Account Disbursements
Journal
- Rule 1.15(a)(1)
Lists all disbursements chronologically and identifies
the recipient, purpose and date of each disbursement.
Trust Account Client Ledger Page
-
Rule 1.15(a)(2)
A separate page for each client/matter showing chronologically
all receipts, disbursements and balances for each client/matter.
Trust
Account Checkbook Register
-
Rule 1.15(a)(4)
Lists sequentially all trust account deposits and checks
and reflects a current and accurate daily balance on the trust
account.
VII. Where to Find Help
-
ARDC
Ethics Inquiry Program - a telephone inquiry line that
provides general information on where to find sources to help
resolve hypothetical questions arising under the Rules. Call the
ARDC at either the Chicago office at: 312/565-2600 or
800/826-8625 or the Springfield office at: 217/522-6838 or
800/252-8048.
-
Lawyers Trust
Fund of Illinois (IOLTA) - Lawyers Trust Fund of Illinois,
Two Prudential Plaza, 180 North Stetson Avenue, Suite 820,
Chicago, Illinois 60601; (312) 938-2906 or (800) 624-8962; Fax
(312) 938-3091 or visit the Lawyers Trust Fund website at
www.ltf.org.
-
ABA
ETHICSearch - a research service for those needing
information on the ABA Model Rules, Standards and ethics
opinions. Call 800/285-2221 or visit the ABA website at
www.abanet.org/cpr/ethicsearch/ to use their
online
form
for your ethics question. Most inquiries are handled on a same
day basis. Expedited same day service and fax and mailing
services can also be arranged.
-
Bar associations
– Illinois State Bar Association (ISBA) Committee on
Professional Responsibility - advisory committee that receive
inquiries and render opinions either addressed to the inquiring
lawyer or published in the Illinois Bar Journal. The ISBA
ethics advisory opinions may be obtained from the ISBA website
(for ISBA members only) at
www.illinoisbar.org. Also, the
National Organization of Bar Counsel (NOBC) maintains a
searchable database of summaries of attorney disciplinary
proceedings and ethics opinions from across the country on its
website
(www.nobc.org).
(a) A lawyer shall hold property of clients or third persons that is
in a lawyer’s possession in connection with a representation
separate from the lawyer’s own property. Funds shall be kept
deposited in a
one or more separate account
and identifiable interest- or dividend-bearing client trust accounts
maintained at an eligible financial institution in the
state where the lawyer’s office is situated, or elsewhere with the
informed consent of the client
or third person. For the purposes of this
Rule, a client trust account means an IOLTA account as defined in
paragraph (i)(2), or a separate, interest-bearing non-IOLTA client
trust account established to hold the funds of a client or third
person as provided in paragraph (f). Funds of clients or third
persons shall not be deposited in a non-interest-bearing or
non-dividend-bearing account. Other,
tangible property shall be identified as such and
appropriately safeguarded. Complete records of such
client trust account funds and
other property shall be kept by the lawyer and shall be preserved
for a period of seven years after termination of the representation.
Maintenance of complete records of
client trust accounts shall require that a lawyer:
(1) prepare and maintain receipt and disbursement journals for all
client trust accounts required by this Rule containing a record of
deposits and withdrawals from client trust accounts specifically
identifying the date, source, and description of each item
deposited, and the date, payee and purpose of each disbursement;
(2) prepare and maintain contemporaneous ledger records for
all client trust accounts showing,
for each separate trust client or beneficiary, the source of all
funds deposited, the date of each deposit, the names of all persons
for whom the funds are or were held, the amount of such funds, the
dates, descriptions and amounts of charges or withdrawals, and the
names of all persons to whom such funds were disbursed;
(3) maintain copies of all accountings to clients or
third persons showing the
disbursement of funds to them or on their behalf, along with copies
of those portions of clients’ files that are reasonably necessary
for a complete understanding of the financial transactions
pertaining to them;
(4) maintain all client trust account checkbook registers,
check stubs, bank statements,
records of deposit, and checks or other records of debits;
(5) maintain copies of all retainer and compensation agreements with
clients;
(6) maintain copies of all bills rendered to clients for legal fees
and expenses;
(7) prepare and maintain reconciliation reports of all client trust
accounts, on at least a quarterly basis, including
reconciliations of ledger balances
with client trust account balances;
(8) make appropriate arrangements for the maintenance of the
records in the event of the
closing, sale, dissolution, or merger of a law practice.
Records required by this Rule may be
maintained by electronic, photographic, or other media provided that
printed copies can be produced, and the records are readily
accessible to the lawyer.
Each client trust account shall be
maintained only in an eligible financial institution selected by the
lawyer in the exercise of ordinary prudence.
(b) A lawyer may deposit the lawyer’s own funds in a client trust
account for the sole purpose of paying bank service charges on that
account, but only in an amount necessary for that purpose.
(c) A lawyer shall deposit in a client trust account funds received
to secure payment of legal fees and expenses, to be withdrawn by the
lawyer only as fees are earned and expenses incurred. Funds received
as a fixed fee, a general retainer, or an advance payment retainer
shall be deposited in the lawyer’s general account or other account
belonging to the lawyer. An advance payment retainer may be used
only when necessary to accomplish some purpose for the client that
cannot be accomplished by using a security retainer. An agreement
for an advance payment retainer shall be in a writing signed by the
client that uses the term “advance payment retainer” to describe the
retainer, and states the following:
(1) the special purpose for the advance payment retainer and an
explanation why it is advantageous to the client;
(2) that the retainer will not be held in a client trust account,
that it will become the property of the lawyer upon payment, and
that it will be deposited in the lawyer’s general account;
(3) the manner in which the retainer will be applied for services
rendered and expenses incurred;
(4) that any portion of the retainer that is not earned or required
for expenses will be refunded to the client;
(5) that the client has the option to employ a security retainer,
provided, however, that if the lawyer is unwilling to represent the
client without receiving an advance payment retainer, the agreement
must so state and provide the lawyer’s reasons for that condition.
(d) Upon receiving funds or other property in which a client or
third person has an interest, a lawyer shall promptly notify the
client or third person. Except as stated in this Rule or otherwise
permitted by law or by agreement with the client, a lawyer shall
promptly deliver to the client or third person any funds or other
property that the client or third person is entitled to receive and,
upon request by the client or third person, shall promptly render a
full accounting regarding such property.
(e) When in the course of representation a lawyer is in possession
of property in which two or more persons (one of whom may be the
lawyer) claim interests, the property shall be kept separate by the
lawyer until the dispute is resolved. The lawyer shall promptly
distribute all portions of the property as to which the interests
are not in dispute.
(f) All nominal or short-term
funds of clients or third persons held by a lawyer or law firm
which are nominal in amount or are expected
to be held for a short period of time,
including advances for costs and expenses, and funds belonging in
part to a client or third person and in part presently or
potentially to the lawyer or law firm, shall be deposited in one or
more pooled interest- or dividend-bearing trust accounts known as
Interest on Lawyers’ Trust Accounts (“IOLTA accounts”), established
with an eligible financial institution selected by a lawyer or law
firm in the exercise of ordinary prudence, and with the Lawyers
Trust Fund of Illinois designated as income beneficiary.
IOLTA accounts, as defined in paragraph (i)(2).
A lawyer or law firm shall deposit all funds of clients or third
persons which are not nominal in amount or expected to be held for a
short period of time into a separate interest- or dividend-bearing
client trust account with the client designated as income
beneficiary. Funds of clients or third persons shall not be
deposited in a non-interestbearing or non-dividend-bearing account.
Each IOLTA account shall comply with the following
provisions:
(1) Each lawyer or law firm in receipt of nominal or short-term
client funds shall establish one or more IOLTA accounts with an
eligible financial institution authorized by federal or state law to
do business in the state of Illinois. An eligible financial
institution is a bank or a savings bank insured by the Federal
Deposit Insurance Corporation or an open-end investment company
registered with the Securities and Exchange Commission,
and
which offers IOLTA accounts within
the requirements of this Rule as administered by the Lawyers Trust
Fund of Illinois.
(2) Eligible institutions shall maintain IOLTA accounts that pay the
highest interest rate or dividend available from the institution to
its non-IOLTA account customers when IOLTA accounts meet or exceed
the same minimum balance or other account eligibility guidelines, if
any. In determining the highest interest rate or dividend generally
available from the institution to its non-IOLTA accounts, eligible
institutions may consider factors, in addition to the IOLTA account
balance, customarily considered by the institution when setting
interest rates or dividends for its customers, provided that such
factors do not discriminate between IOLTA accounts and accounts of
non-IOLTA customers, and that these factors do not include that the
account is an IOLTA account.
(3) An IOLTA account that meets the highest comparable rate or
dividend standard set forth in Pparagraph
(f)(2) must use one of the identified account options as an IOLTA
account, or pay the equivalent yield on an existing IOLTA account in
lieu of using the highest-yield bank product:
(a) a checking account paying preferred interest rates, such as
money market or indexed rates, or any other suitable
interest-bearing deposit account offered by the eligible institution
to its non-IOLTA customers.
(b) for accounts with balances of $100,000 or more, a business
checking account with automated investment feature, such as an
overnight sweep and investment in repurchase agreements fully
collateralized by U.S. Government securities as defined in paragraph
(h).
(c) for accounts with balances of $100,000 or more, a money market
fund with, or tied to, check-writing capacity, that must be solely
invested in U.S. Government securities or securities fully
collateralized by U.S. Government securities, and that has total
assets of at least $250 million.
(4) As an alternative to the account options in paragraph (f)(3),
the financial institution may pay a “safe harbor” yield equal to 70%
of the Federal Funds Target Rate or 1.0%, whichever is higher.
(5) Each lawyer or law firm shall direct the eligible financial
institution to remit monthly earnings on the IOLTA account directly
to the Lawyers Trust Fund of Illinois. For each individual IOLTA
account, the eligible financial institution shall provide: a
statement transmitted with each remittance showing the name of the
lawyer or law firm directing that the remittance be sent; the
account number; the remittance period; the rate of interest applied;
the account balance on which the interest was calculated; the
reasonable service fee(s) if any; the gross earnings for the
remittance period; and the net amount of earnings remitted.
Remittances shall be sent to the Lawyers Trust Fund electronically
unless otherwise agreed. The
financial institution may assess only allowable reasonable fees, as
defined in paragraph (i)(8).
Fees in excess of the earnings
accrued on an individual IOLTA account for any month shall not be
taken from earnings accrued on other IOLTA accounts or from the
principal of the account.
(6) Each lawyer or law firm shall deposit into such interest-bearing
trust accounts all clients’ funds which are nominal in amount or are
expected to be held for a short period of time.
(7) The decision as to whether funds are nominal in amount
or are expected to be held for a short period of time rests
exclusively in the sound judgment of the lawyer or law firm, and no
charge of ethical impropriety or other breach of professional
conduct shall attend a lawyer’s or law firm’s judgment on what is
nominal or short term.
(g) A lawyer or law firm should exercise
reasonable judgment in determining whether funds of a client or
third person are nominal in amount or are expected to be held for a
short period of time. No charge of ethical impropriety or other
breach of professional conduct shall attend to a lawyer’s or law
firm’s exercise of reasonable judgment under this rule or decision
to place client funds in an IOLTA account or a non-IOLTA client
trust account on the basis of that determination.
Ordinarily, in determining the type of account into which to deposit
particular funds for a client or third person, a lawyer or a law
firm shall take into consideration the following factors:
(1) the amount of interest which the funds would earn during the
period they are expected to be held and the likelihood of delay in
the relevant transaction or proceeding;
(2) the cost of establishing and administering the account,
including the cost of the lawyer’s services;
(3) the capability of the financial institution, through
subaccounting, to calculate and pay interest earned by each client’s
funds, net of any transaction costs, to the individual client.
(h) All trust accounts, whether IOLTA or
non-IOLTA, shall be
established in compliance with the following provisions on
dishonored instrument notification:
(1) A lawyer shall maintain trust accounts only in eligible
financial institutions that have
filed with the Attorney Registration and Disciplinary Commission an
agreement, in a form provided by the Commission, to report to the
Commission in the event any properly payable instrument is presented
against a client trust account containing insufficient funds,
irrespective of whether or not the instrument is honored. Any such
agreement shall apply to all branches of the financial institution
and shall not be canceled except upon 30 days notice in writing to
the Commission. The Commission shall annually publish a list of
financial institutions that have agreed to comply with this rule and
shall establish rules and procedures governing amendments to the
list.
(2) The overdraft notification agreement shall provide that all
reports made by the financial institution shall be in the following
format:
(a) In the case of a dishonored instrument, the report
shall be identical to the
overdraft notice customarily forwarded to the depositor, and should
include a copy of the dishonored instrument, if such a copy is
normally provided to depositors; and
(b) In the case of instruments that are presented
against insufficient funds but
which instruments are honored, the report shall identify the
financial institution, the lawyer or law firm, the account number,
the date of presentation for payment and the date paid, as well as
the amount of overdraft created thereby.
Such reports shall be made
simultaneously with, and within the time provided by law for, notice
of dishonor, if any. If an instrument presented against insufficient
funds is honored, then the report shall be made within five banking
days of the date of presentation for payment against insufficient
funds.
(3) Every lawyer
practicing or admitted to practice in this
jurisdiction shall, as a condition thereof, be conclusively deemed
to have consented to the reporting and production requirements
mandated by this Rule.
(4) Nothing herein shall preclude a financial institution from
charging a particular lawyer or
law firm for the reasonable cost of producing the reports and
records required by paragraph (h) of this Rule. Fees charged for the
reasonable cost of producing the reports and records required by
paragraph (h) are the sole responsibility of the lawyer or law firm,
and are not allowable reasonable fees for IOLTA accounts as those
are defined in paragraph (i)(8).
(h)
(i)
Definitions
(1) “Funds”
denotes any form of money, including cash,
payment instruments such as checks, money orders or sales drafts,
and electronic fund transfers.
(1)
(2)
“IOLTA account” means ana
pooled interest- or
dividend-bearing client
trust account, established with an
eligible financial institution with the Lawyers Trust Fund of
Illinois designated as income beneficiary,
benefitting the Lawyers Trust Fund of
Illinois, established in an eligible institution
for the deposit of nominal or short-term funds of clients or third
persons as defined in paragraph (f) and from which funds may be
withdrawn upon request as soon as permitted by law.
(3) “Eligible financial institution” is a bank or a savings bank
insured by the Federal Deposit
Insurance Corporation or an open-end investment company registered
with the Securities and Exchange Commission that agrees to provide
dishonored instrument notification regarding any type of client
trust account as provided in paragraph (h) of this Rule; and that
with respect to IOLTA accounts, offers IOLTA accounts within the
requirements of paragraph (f) of this Rule.
(4) “Properly payable” refers to an instrument which, if
presented in the normal course of
business, is in a form requiring payment under the laws of this
jurisdiction.
(2)
(5)
“Money market fund” is an investment company registered under the
Investment Company Act of 1940, as amended, that is qualified to
hold itself out to investors as a money market fund or the
equivalent of a money market fund under Rules and Regulations
adopted by the Securities and Exchange Commission pursuant to said
Act.
(3)
(6)
“U.S. Government securities” refers to U.S. Treasury obligations and
obligations issued by or guaranteed as to principal and interest by
any AAA-rated United States agency or instrumentality thereof. A
daily overnight financial repurchase agreement (“repo”) may be
established only with an institution that is deemed to be “well
capitalized” or “adequately capitalized” as defined by applicable
federal statutes and regulations.
(4)
(7)
“Safe harbor” is a yield that if paid by the financial institution
on IOLTA accounts shall be deemed as a comparable return in
compliance with this Rule. Such yield shall be calculated as 70% of
the Federal Funds Target Rate as reported in the Wall Street Journal
on the first business day of the calendar month.
(5)
(8)
“Allowable reasonable fees” for IOLTA accounts are per-check
charges, per deposit charges, a fee in lieu of a minimum balance,
federal deposit insurance fees, automated investment (“sweep”) fees,
and a reasonable maintenance fee, if those fees are charged on
comparable bank accounts maintained by non-IOLTA depositors.
All other fees are the responsibility of, and may be charged to, the
lawyer or law firm maintaining the IOLTA account.
(i)
(j)
In the closing of a real estate transaction, a lawyer’s disbursement
of funds deposited but not collected shall not violate his or her
duty pursuant to this Rule 1.15 if, prior to the closing, the lawyer
has established a segregated Real Estate Funds Account (REFA)
maintained solely for the receipt and disbursement of such funds,
has deposited such funds into a REFA, and:
(1) is acting as a closing agent pursuant to an insured closing
letter for a title insurance company licensed in the State of
Illinois and uses for such funds a segregated REFA maintained solely
for such title insurance business; or
(2) has met the “good-funds” requirements. The good-funds
requirements shall be met if the bank in which the REFA was
established has agreed in a writing directed to the lawyer to honor
all disbursement orders drawn on that REFA for all transactions up
to a specified dollar amount not less than the total amount being
deposited in good funds. Good funds shall include only the following
forms of deposits: (a) a certified check, (b) a check issued by the
State of Illinois, the United States, or a political subdivision of
the State of Illinois or the United States, (c) a cashier’s check,
teller’s check, bank money order, or official bank check drawn on or
issued by a financial institution insured by the Federal Deposit
Insurance Corporation or a comparable agency of the federal or state
government, (d) a check drawn on the trust account of any lawyer or
real estate broker licensed under the laws of any state, (e) a
personal check or checks in an aggregate amount not exceeding $5,000
per closing if the lawyer making the deposit has reasonable and
prudent grounds to believe that the deposit will be irrevocably
credited to the REFA, (f) a check drawn on the account of or issued
by a lender approved by the United States Department of Housing and
Urban Development as either a supervised or a nonsupervised
mortgagee as defined in 24 C.F.R. § 202.2, (g) a check from a title
insurance company licensed in the State of Illinois, or from a title
insurance agent of the title insurance company, provided that the
title insurance company has guaranteed the funds of that title
insurance agent. Without limiting the rights of the lawyer against
any person, it shall be the responsibility of the disbursing lawyer
to reimburse the trust account for such funds that are not collected
and for any fees, charges and interest assessed by the paying bank
on account of such funds being uncollected.
Adopted July 1, 2009, effective
January 1, 2010; amended July --, 2011,
effective September 1, 2011.
Comment
[1] A lawyer should hold property of others with the care required
of a professional fiduciary. Securities should be kept in a safe
deposit box, except when some other form of safekeeping is warranted
by special circumstances. All property that is the property of
clients or third persons, including prospective clients, must be
kept separate from the lawyer’s business and personal property and,
if monies, in one or more client
trust accounts. Client trust accounts
should be made identifiable through their designation as “client
trust account” or “client funds account” or words of similar import
indicating the fiduciary nature of the account. Separate
trust accounts may be warranted when administering estate monies or
acting in similar fiduciary capacities. A lawyer should maintain on
a current basis books and records in accordance with generally
accepted accounting practice complete
records of client trust account funds as required by paragraph (a),
including subparagraphs (1) through (8). These requirements
articulate recordkeeping principles that provide direction to a
lawyer in the handling of funds entrusted to the lawyer by a client
or third person. Compliance with these requirements will benefit the
attorney and the client or third party as these fiduciary funds will
be safeguarded and documentation will be available to fulfill the
lawyer’s fiduciary obligation to provide an accounting to the owners
of the funds and to refute any charge that the funds were handled
improperly.
[2] While normally it is impermissible to commingle the lawyer’s own
funds with client funds, paragraph (b) provides that it is
permissible when necessary to pay bank service charges on that
account. Accurate records must be kept regarding which part of the
funds are the lawyer’s.
[3] Lawyers often receive funds from which the lawyer’s fee will be
paid. The lawyer is not required to remit to the client funds that
the lawyer reasonably believes represent fees owed. However, a
lawyer may not hold funds to coerce a client into accepting the
lawyer’s contention. The disputed portion of the funds must be kept
in a trust account and the lawyer should suggest means for prompt
resolution of the dispute, such as arbitration. The undisputed
portion of the funds shall be promptly distributed. Specific
guidance concerning client trust accounts is provided in the Client
Trust Account Handbook published by the Illinois Attorney
Registration and Disciplinary Commission as well as on the website
of the Illinois Attorney Registration and Disciplinary Commission.
[3A] Paragraph (c) relates to legal fees and expenses that have been
paid in advance. The reasonableness, structure, and division of
legal fees are governed by Rule 1.5 and other applicable law.
[3B] Paragraph (c) must be read in
conjunction with
Dowling v. Chicago Options Associates, Inc., 226 Ill. 2d
277 (2007). In
Dowling, the Court distinguished different types of
retainers. It recognized advance payment retainers and approved
their use in limited circumstances where the lawyer and client agree
that a retainer should become the property of the lawyer upon
payment. Prior to
Dowling, the Court recognized only two types of
retainers. The first, a general retainer (also described as a
“true,” “engagement,” or “classic” retainer) is paid by a client to
the lawyer in order to ensure the lawyer’s availability during a
specific period of time or for a specific matter. This type of
retainer is earned when paid and immediately becomes property of the
lawyer, regardless of whether the lawyer ever actually performs any
services for the client. The second, a “security” retainer, secures
payment for future services and expense, and must be deposited in a
client trust account pursuant to paragraph (a). Funds in a security
retainer remain the property of the client until applied for
services rendered or expenses incurred. Any unapplied funds are
refunded to the client. Any written retainer agreement should
clearly define the kind of retainer being paid. If the parties agree
that the client will pay a security retainer, that term should be
used in any written agreement, which should also provide that the
funds remain the property of the client until applied for services
rendered or expenses incurred and that the funds will be deposited
in a client trust account. If the parties’ intent is not evident, an
agreement for a retainer will be construed as providing for a
security retainer.
[3C]
An advance payment retainer is a present payment to the
lawyer in exchange for the commitment to provide legal services in
the future. Ownership of this retainer passes to the lawyer
immediately upon payment; and the retainer may not be deposited into
a client trust account because a lawyer may not commingle property
of a client with the lawyer’s own property. However, any portion of
an advance payment retainer that is not earned must be refunded to
the client. An advance payment retainer should be used sparingly,
only when necessary to accomplish a purpose for the client that
cannot be accomplished by using a security retainer. An advance
payment retainer agreement must be in a written agreement signed by
the client that contains the elements listed in paragraph (c). An
advance payment retainer is distinguished from a fixed fee (also
described as a “flat” or “lump-sum” fee), where the lawyer agrees to
provide a specific service (e.g.,
defense of a criminal charge, a real estate closing, or preparation
of a will or trust) for a fixed amount. Unlike an advance payment
retainer, a fixed fee is generally not subject to the obligation to
refund any portion to the client, although a fixed fee is subject,
like all fees, to the requirement of Rule 1.5(a) that a lawyer may
not charge or collect an unreasonable fee.
[3D] The type
of retainer that is appropriate will depend on the circumstances of
each case. The guiding principle in the choice of the type of
retainer is protection of the client’s interests.
In the vast majority of cases, this will dictate that funds paid
to retain a lawyer will be considered a security retainer and placed
in a client trust account, pursuant to this Rule.
[4] Paragraph (e) also recognizes that third parties may have lawful
claims against specific funds or other property in a lawyer’s
custody, such as a client’s creditor who has a lien on funds
recovered in a personal injury action. A lawyer may have a duty
under applicable law to protect such third-party claims against
wrongful interference by the client. In such cases, when the
third-party claim is not frivolous under applicable law, the lawyer
must refuse to surrender the property to the client until the claims
are resolved. A lawyer should not unilaterally assume to arbitrate a
dispute between the client and the third party, but, when there are
substantial grounds for dispute as to the person entitled to the
funds, the lawyer may file an action to have a court resolve the
dispute.
[5] The obligations of a lawyer under this Rule are independent of
those arising from activity other than rendering legal services. For
example, a lawyer who serves only as an escrow agent is governed by
the applicable law relating to fiduciaries even though the lawyer
does not render legal services in the transaction and is not
governed by this Rule.
[6] Paragraphs (a), (f)
and (g) requires that
certain client funds nominal or
short-term funds belonging to clients or third persons be
deposited in a pooled, interest-bearing trust
account one or more IOLTA accounts as
defined in paragraph (i)(2) and provides that the
interest earned on any such accounts
shall be submitted to the Lawyers Trust Fund of Illinois. The
Lawyers Trust Fund of Illinois will disburse the funds so received
to qualifying organizations and programs to be used for the purposes
set forth in its by-laws. The purposes of the Lawyers Trust Fund of
Illinois may not be changed without the approval of the Supreme
Court of Illinois. The decision as to whether funds are nominal or
short-term shall be in the sole discretion
reasonable judgment of the
depositing lawyer or law firm. Client and
third-person funds that are
neither nominal or short-term shall
may continue to be deposited in separate, interest-
or dividend-bearing client
trust accounts for the benefit of the client as set forth in
Pparagraphs
(a) and (f).
[7] Paragraph (h) requires that lawyers
maintain trust accounts only in financial institutions that have
agreed to report trust account overdrafts to the ARDC. The trust
account overdraft notification program is intended to provide early
detection of problems in lawyers’ trust accounts, so that errors by
lawyers and/or banks may be corrected and serious lawyer
transgressions pursued.
[8] Paragraph (i) provides definitions
that pertain specifically to Rule 1.15. Paragraph (1) defines
expansively the meaning of “funds,” to include any form of money,
including electronic fund transfers. Paragraph (2) defines an IOLTA
account and paragraph (3) defines an eligible financial institution
for purposes of the overdraft notification and IOLTA programs.
Paragraph (4) defines “properly payable,” a term used in the
overdraft notification provisions in paragraph (h)(1). Paragraphs
(5) through (8) define terms pertaining to IOLTA accounts.
[7] [9] Paragraph (ij)
applies only to the closing of real estate transactions and adopts
the “good-funds” doctrine. That doctrine provides for the
disbursement of funds deposited but not yet collected if the lawyer
has already established an appropriate Real Estate Funds Account and
otherwise fulfills all of the requirements contained in the Rule.
Adopted July 1, 2009, effective
January 1, 2010; amended July 1, 2011,
effective September 1, 2011.
RULE 756.
Registration and Fees
***
(d)
Disclosure of Trust Accounts. As part of
registering under this rule, each lawyer shall identify any and all
accounts maintained by the lawyer during the preceding 12 months to
hold property of clients or third persons in the lawyer's possession
in connection with a representation, as required under Rule 1.15(a)
of the Illinois Rules of Professional Conduct, by providing the
account name, account number and financial institution for each
account. For each account, the lawyer shall also indicate
whether each account is an IOLTA account, as defined in Rule 1.15(d)
of the Illinois Rules of Professional Conduct. If a lawyer
does not maintain a trust account, the lawyer shall state the reason
why no such account is required.
***
(g)
Removal from the Master Roll. On February 1 of each year the
Administrator shall remove from the master roll the name of any
person who has not registered for that year. A lawyer will be
deemed not registered for the year if the lawyer has failed to
provide trust account information required by paragraph (d) of this
rule or if the lawyer has failed to provide information concerning
malpractice coverage required by paragraph (e) or information on
voluntary pro bono service required by paragraph (f) of this rule.
Any person whose name is not on the master roll and who practices
law or who holds himself out as being authorized to practice law in
this State is engaged in the unauthorized practice of law and may
also be held in contempt of the court.
***
Adopted
January 25, 1973, effective February 1, 1973; amended, effective May
17, 1973, April 1, 1974, and February 17, 1977; amended August 9,
1983, effective October 1, 1983; amended April 27, 1984, and June 1,
1984, effective July 1, 1984; amended July 1, 1985, effective August
1, 1985; amended November 1, 1986; amended December 1, 1988,
effective immediately; amended November 20, 1991, effective
immediately; amended June 20, 1999, effective November 1, 1999;
amended July 6, 2000, effective November 1, 2000; amended July 26,
2001, effective immediately; amended October 4, 2002, effective
immediately; amended June 15, 2004, effective October 1, 2004;
amended May 23, 2005, effective immediately; amended September 29,
2005, effective immediately; amended June 14, 2006, effective
immediately; amended September 14, 2006, effective immediately;
amended March 26, 2008, effective July 1, 2008.
RULE 766
Confidentiality and Privacy
(amended November 19, 2004, effective January 1, 2005)
(a) Public
Proceedings. Proceedings under Rules 751 through 780 shall
be public with the exception of the following matters, which shall
be private and confidential:
***
(10) information concerning trust
accounts provided by lawyers as part of the annual registration
pursuant to Rule 756(d);
***
RULE 769
Maintenance of Records.
It shall be the
duty of every attorney to maintain originals, copies or
computer-generated images of the following:
(1) records which
identify the name and last known address of each of the attorney's
clients and which reflect whether the representation of the client
is ongoing or concluded; and
(2) all financial
records related to the attorney's practice, for a period of not less
than seven years, including but not limited to bank statements, time
and billing records, checks, check stubs, journals, ledgers, audits,
financial statements, tax returns and tax reports.
Adopted October 20,
1989, effective November 1, 1989; amended July 18, 1990, effective
August 1, 1990 Adopted December 2, 1986, effective January 1, 1987;
amended June 12, 1987, effective August 1, 1987; amended November
25, 1987, effective November 25, 1987; amended August 6, 1993,
effective immediately; amended October 15, 1993, effective
immediately; amended March 26, 2001, effective immediately; amended
April 1, 2003, effective immediately.
Committee Comment
(April 1, 2003)
This amendment
gives attorneys the option of maintaining records in forms that save
space and reduce cost without increasing the risk of premature
destruction. For example, CDs and DVDs have a normal life exceeding
seven years, so an attorney might use them to maintain financial
records. At present, however, floppy disks, tapes, hard drives, zip
drives, and other magnetic media have insufficient normal life to
meet the requirements of this rule.
IOLTA
Enrollment Forms and Instructions
To
establish an IOLTA account, the Lawyers Trust Fund of Illinois (LTF)
has step-by-step instructions available on its website at
www.ltf.org,
and staff members at the Lawyers Trust Funds can provide assistance.
Lawyers
Trust Fund of Illinois
Two Prudential Plaza
180 North Stetson Ave., Suite 820
Chicago, IL 60601
(312) 938-2906 [Main]
(312) 938-3091 [Fax]
1-800-624-8962 [Toll Free]
To
download the IOLTA forms, click on the desired form below:
IOLTA Enrollment Form
(in MS Word format)
IOLTA
Enrollment Form (in .pdf format)
SUGGESTED SOURCES FOR RESEARCHING ETHICS ISSUES
1.
Annotated Model Rules of
Professional Conduct, 6th
Ed. (2007) - an ABA publication available from the ABA Center for
Professional Responsibility (www.abanet.org). Consists
of the ABA Model Rules, as amended in 2002 and 2003, and legal
background notes analyzing case law, opinions, law review articles
and legal treatises.
2.
Restatement of the Law Governing Lawyers, American Law
Institute (ALI) (2000) – two-volume set can be obtained from ALI at
(800) CLE-NEWS or
www.ali.org.
3.
ABA/BNA, The Lawyer's Manual on Professional Conduct (1984) -
four-volume, looseleaf subscription service, consisting of a
substantive discussion on the state of the law on professional
responsibility, the full text of the ABA Model Codes, recent ABA
ethics opinions, digests of ethics opinions issued by state and
local bar associations, and recent developments in the field of
professional responsibility including opinions, case law and reports
of conferences and law reviews. Updated bi-weekly. Also
available by subscription (1-800-372-1033 or www.bna.com).
4.
Hazard, G. & Hodes, W., The Law of Lawyering, 2d Ed. (1990) -
looseleaf publication explaining the ABA Model Rules of
Professional Conduct.
5.
West Publishing Company, Illinois Digests 2d, Attorney &
Client.
6.
AmJur 2d, Attorneys (Lawyers Cooperative Publishing).
7.
Ethics Opinions issued by the ABA Standing Committee on Ethics and
Professional Responsibility, both formal opinions (beginning with
1924) and informal opinions (beginning with 1961), available in
bound volumes from the ABA Center on Professional Responsibility.
Most opinions can also be obtained off of WESTLAW database, "Ethics
& Professional Responsibility" or LEXIS database, "Ethics."
8.
Illinois State Bar Association Opinions on Professional Ethics, 1953
- present. Contains hypothetical questions concerning
professional ethics and suggested, advisory answers. Ethics
opinions issued between 1953 and 1984 are contained in two bound
volumes: Ethics Op. Nos. 101-687, issued between 1953 and 1980, are
contained in the initial volume of Professional Ethics Opinions; and
Ethics Op. Nos. 644-874, issued between 1980 and 1984, are contained
in volume 2. Opinions issued from 1984 to the present can be
obtained from the ISBA website for ISBA members only at
www.illinoisbar.org.
9.
ABA Center for Professional Responsibility operates ETHICSearch, a
research service for those needing information on the ABA Model
Rules, Standards and ethics opinions. Call 800/285-2221 or
visit the ABA website at www.abanet.org/cpr/ethicsearch/ to
use their online form.
10.
ARDC Ethics Inquiry Program - provides general information on
where to find sources to help resolve questions arising under the
Rules. Call either the ARDC Chicago office at: 312/565-2600 or
800/826-8625 or Springfield office at: 217/522-6838 or
800/252-8048.
11.
American Legal Ethics Library (Legal Information Institute)
www.law.cornell.edu/ethics – contains ethics rules of
many states and includes annotations to many of the rules, including
the Illinois Rules of Professional Conduct
12.
National Organization of Bar Counsel
www.nobc.org
– summaries of lawyer disciplinary cases throughout the country