B. Disciplinary Treatment of Management of Trust Property and Funds

The primary objectives of the disciplinary system are to safeguard the public and to maintain the integrity of the legal profession. In re Neff, 83 Ill.2d 20, 413 N.E.2d 1282 (1980).

With regards to client trust accounts, twenty-one years ago in In re Clayter, 78 Ill.2d 276, 278, 399 N.E.2d 1318, 1319 (1980), the Illinois Supreme Court admonished lawyers:

Despite the Court's admonition in Clayter, the mishandling of client funds continues to be a problem. The improper handling of client funds has consistently been the most frequent area alleged in formal complaints filed before the Hearing Board.

In a disciplinary case involving Rule 1.15 violations, the Hearing Board observed:

The ARDC investigative staff approach every complaint that suggests the mishandling of client funds as a potentially serious case meriting close scrutiny. Such complaints usually require intensive inspection of a lawyer's account records, related client files, and bank records to assure that no impropriety has occurred. 

Where the evidence shows misuse of funds, formal charges will be pursued whether or not the client has ultimately been reimbursed. Sanctions for improper handling of client funds range from censure to disbarment. In any case where the evidence suggests dishonest motives or reckless disregard for the client's or third person’s property, disbarment or a lengthy suspension will be sought.

Whenever a lawyer holds the property of a client or third person in connection with a representation, Rule 1.15 applies. Rule 1.15 governs the requirements and procedures a lawyer must follow while holding that property. Entitled "Safekeeping Property," Rule 1.15 applies to both funds and tangible property. Since lawyers are most frequently holding funds on behalf of a client, this Handbook will discuss the requirements of Rule 1.15 mainly in the context of holding client funds. Nevertheless, the requirements and duties expressed in Rule 1.15 apply with equal force to tangible property held in trust by the lawyer. Also, by using the word “safekeeping” in its title, Rule 1.15 requires the lawyer to do more than just hold property, the lawyer must take adequate precautions to “safekeep” or protect the property from actual or potential loss.

A. Definitions

1. "Trust" Account

The word "trust" is used to reflect the fiduciary role in which a lawyer receives or holds property on behalf of a client or a third person. See 2010 Rule 1.15, cmt. [1].  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 funds belonging to a client into the lawyer's own personal or business account or when the lawyer deposits the lawyer’s own personal funds into the trust account where client funds are maintained (In re Clayter, 78 Ill.2d 276, 399 N.E.2d 1318 (1980)), other than as permitted by Rule 1.15(d)(5) [2010 Rule 1.15(b)] for the sole purpose of paying bank services charges.

3. Conversion

Conversion has been defined by the Illinois Supreme Court 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 trust account is either overdrawn or when the lawyer allows the balance in the trust account to become less than the total amount the lawyer is holding in trust, even if the lawyer has other funds. 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 Accounts

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. See Rule 1.15(a). Typically, it will be an account opened on behalf of one client (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 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 goes to the IOLTA program (see discussion of IOLTA accounts below). A lawyer may have one or more trust accounts depending on need.

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. See Rule 1.15(e) [2010 Rule 1.15(g)]. 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(d) [2010 Rule 1.15(f)] requires all nominal or short-term funds of clients or third persons must be deposited in what is called an IOLTA trust account.  IOLTA is the acronym for the Interest on Lawyers 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.  IOLTA trust accounts are pooled, interest-bearing or dividend-earning accounts, where the moneys of several clients are being held for different periods of time.  Rule 1.15(f)(1) [2010 Rule 1.15(h)(1)] defines “IOLTA account” as “an interest or dividend-bearing trust account benefiting the Lawyer Trust Fund of Illinois established in an eligible institution for the deposit of nominal or short-term funds of clients or third person as defined in (d) [(f)] and from which funds may be withdrawn upon request as soon as permitted by law.”   

The IOLTA account is operationally different from a non-IOLTA trust account in two respects, one, that the taxpayer identification number (TIN) on the account is the Lawyers' Trust Fund's and not the client'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.

The net interest or dividends earned on IOLTA trust accounts is paid directly to the Lawyers Trust Fund, which uses the money to fund legal assistance and other programs benefiting the public throughout the state, specifically 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 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 exclusively within the sound 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 judgment on what is nominal or short term.  See Rule 1.15(d)(5) [2010 Rule 1.15(f)(7)].  

As of June 1, 2007, IOLTA accounts must be maintained only at financial institutions approved by the Lawyers Trust Fund of Illinois, thereby ensuring that IOLTA trust accounts will receive the same interest as other types of similar accounts.   Eligible financial institutions now include banks and savings banks insured by the FDIC, as well as investment companies that register with the CED, who offer money market funds collaterized by US government obligations.  The Lawyers Trust Fund website (www.ltf.org) has a listing of those institutions, which it updates frequently.  To contact by phone the Lawyers Trust Fund of Illinois, please call (800) 624-8962 or (312) 938-2906.

B. 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. Although Rule 1.15 does not expressly prescribe any particular accounting procedures or methods that lawyers must employ to fulfill the duties of “safekeeping” trust property, 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

All property of clients or third persons that is in a lawyer’s possession must be kept separate from the lawyer’s own property. Funds must be maintained in an account that is separate from the lawyer's personal and business accounts. See Rule 1.15(a). Holding client or third person funds in a safe 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 (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 divorce proceedings or dies; and
  
  

• discourages the lawyer from 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 how much of their funds the lawyer has received, held, and paid out from the trust account. This is done through updated and accurate record keeping. 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 trust account. Therefore, the account must be opened as a 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 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 trust account).

Identifying the account as a 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.

C. General Duties under Rule 1.15

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 the funds belong to the client or third person and the client or third person must make necessary decisions about what to do with the property which they are entitled to receive. See Rule 1.15(b) [2010 Rule 1.15(d)].
   
   

2. Duty to Segregate - This duty requires the lawyer 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 trust accounting records for a period of no less than seven years after the end of the representation. See Rule 1.15(a); S. Ct. R. 769.
   
   

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(b) [2010 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, so that the client or third person can make important decisions about the property. See Rule 1.15(b) [2010 Rule 1.15(d)].
   
   

6. Duty to Preserve the Integrity of Client Funds - The single most important duty in handling trust property is the duty to refrain from using that property for any purpose whatsoever, other than as directed by the client or third person. 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 of one client before the deposits, which are the source of the disbursement, have cleared, thereby using one client's funds to pay another client. In re Elias, 114 Ill.2d 321, 499 N.E.2d 1327 (1986).

D. Disclosure of Trust Accounts under Supreme Court Rule 756

Effective July 26, 2001, Supreme Court Rule 756 was amended to add a requirement that each lawyer must report, as part of the annual registration process any and all trust accounts maintained by the lawyer during the preceding 12 months.  See Supreme Court Rule 756(d).  If a lawyer does not maintain a trust account, the lawyer must state the reason why no such account is required.  S.Ct.R. 756(d).  A lawyer who fails to provide the trust account information required by Supreme Court 756(d) will be deemed not registered for the year and will be removed from the master roll of lawyers authorized to practice law in Illinois.  See Supreme Court Rule 756(g).  The registration materials, mailed out after October 1 of each year, include a section to provide the trust account information.  Effective January 2005, the trust account report information sent to the ARDC is considered private and confidential under Supreme Court Rule 766(a)(10).

Each deposit and disbursement should describe the client and matter to which it relates.

D. There Is No Such Thing 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 trust account). The balance in the 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.

IV. Client Trust Accounting

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A. Property Held in the Client Trust Account

1. What MUST be held in a Client Trust Account?

1. 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.
   
   

2. All funds to which both the lawyer and client claim an interest arising out of the course of the legal representation. See Rule 1.15(c) [2010 Rule 1.15(e)]. E.g., settlement funds; bond refund checks.
   
   

3. All funds in which both the client and a third person have an interest which come into the lawyer's possession during the representation of the client. E.g., escrow funds held back in a real estate closing; escrow funds held pending the disposition of property in a divorce proceeding.  See Rule 1.15(c) [2010 Rule 1.15(e)]
   
   

4. Funds to secure payment of legal fees and expenses to be withdrawn by the lawyer only as fees are earned and expenses incurred. See 2010 Rule 1.15(c).  See infra part IV.A.5.

2. What funds MAY be held in a Client Trust Account?

1. 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(d)(5) [2010 Rule 1.15(b)].

3. What funds MUST NOT be held in a Client Trust Account?

1. Lawyer's own personal funds.
   
   

2. Lawyer's business and investment monies.
   
   

3. Fees that have been earned and funds received in advance as a fixed fee, a general retainer or an advance payment retainer [under 2010 Rule 1.15(c)].   See infra part IV.A.5.

4. What MUST go into an IOLTA Trust Account?

Client funds that are nominal in amount or expected to be held for a short period of time are to be deposited into one or more "pooled" interest-bearing trust accounts with the interest paid to the Lawyers Trust Fund (Rule 1.15(d)) [2010 Rule 1.15(f)]. E.g., most settlement funds are considered to be short-term since they should be promptly paid to the client once the settlement check has cleared.

Rule 1.15 provides that the decision as to whether funds are long-term or short-term, substantial or nominal, rests in the sound judgment of the lawyer and no charge of ethical impropriety or other breach of professional conduct shall arise out of the lawyer's judgment on what is nominal or short-term (Rule 1.15(d)(5)) [2010 Rule 1.15(f)(7), cmt.[6].]

Rule 1.15(e) [2010 Rule 1.15(g)] sets forth the factors a lawyer shall take into consideration in exercising discretion as to whether funds should be deposited into an IOLTA or non-IOLTA account. For example:

1. the amount of interest which the funds would earn during the period they are expected to be deposited;
   
   

2. the cost of establishing and administering the account, including the cost of the lawyer's services; or
   
   

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.

5. Where Are Retainers and Advances for Fees Deposited? 

Effective January 1, 2010, Rule 1.15(c) governs how legal fees and expenses received in advance are to be handled.  If the funds advanced by a client are to secure payment of legal fees and expenses, to be withdrawn as fees are earned and expenses incurred, the funds are the client's property and therefore must be deposited in the lawyer’s trust account.  Funds received as a fixed fee, a general retainer, or an advance payment retainer and are by agreement with the client the lawyer's property upon payment, the funds shall be deposited in the lawyer's own personal or business account and not in the trust account.  Comment [3B] instructs that Rule 1.15(c) must be read in conjunction with the Illinois Supreme Court's decision in Dowling v. Chicago Options Associates, Inc., 226 Ill.2d 277, 875 N.E.2d 2d 1012 (2007).  In Dowling, the Court recognized the following three types of retainers: 

1) the classic retainer, also referred to as a true or general retainer, which is 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;

2) the security retainer  where 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 trust account and kept separate from the lawyer’s own property until the lawyer applies it to charges for services that are actually rendered.  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; and

3) the advance payment retainer which is 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 in the trust account.    Comment [3C] further describes the advance payment retainer as follows:

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.

2010 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 and must use the term "advance payment retainer" to describe the retainer and state the following:

In determining the type of retainer that is appropriate, the guiding principle is the protection of the client's interests.  See 2010 Rule 1.15, cmt. [3D].  Also, the reasonableness, structure, and division of legal fees is governed by Rule 1.5, and other applicable law.  See 2010 Rule 1.15, cmt. [3A].

B. Unclaimed Client Funds and Unidentified Excesses

Situations may arise where there is an excess amount of funds in the trust account due to (1) the disappearance of a client before a trust account check could have been issued to the client; (2) a client who has not cashed a trust account check; or (3) an unexplained amount of money that cannot be traced as belonging to either a client or the lawyer. Whatever the situation, the bottom line is that the lawyer is not entitled to take the money.

Where the client has disappeared before the lawyer has issued a check to the client, the lawyer must first take all reasonable steps to locate the client. How much effort a lawyer must undertake to find the missing client will vary in each case. Typically, a lawyer would check with the post office to see if the client left a forwarding address. The lawyer would then send a letter to the client’s last known address by regular mail and by certified return receipt advising the client that the lawyer is holding the client’s funds and asking the client for direction in disbursing the money. In cases where a great deal of money is involved, the lawyer may have to contact the client’s relatives, employers, neighbors and friends, publish notice in places the client 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 cannot be located and the funds have remained unclaimed by the client for five years, under the Uniform Disposition of Unclaimed Property Act, 765 ILCS secs. 1025/1 et seq. (1992), the funds are presumed abandoned and the lawyer may remit the funds to the Illinois Unclaimed Property Division of the Illinois State Treasurer. See ISBA Op. No. 845 (Nov. 8, 1983) (what to do with client funds when client cannot be located); see also In re Walner, 119 Ill.2d 511, 525, 519 N.E.2d 903 (1988) (censure given to lawyer who settled client's claim without consent and endorsed client's name on and release and settlement check, without authorization, where no prejudice resulted and attorney acted out of a "misguided sense of efficiency"); ISBA Op. No. 95-11 (January 1996) (absent a narrowly drawn power of attorney, a law firm cannot negotiate a check on behalf of a missing client). For further information on remitting unclaimed property to the state, you may call the Unclaimed Property Division at (217) 785-6998 or go to the State Treasurer website at www.cashdash.net.

The same analysis applies if a trust account check was issued but not cashed by the client. The lawyer should contact the client at the client’s last known address and advise the client that the client has not cashed the trust account check and that unless the client advises the lawyer to issue a replacement check, the funds will be presumed to be abandoned 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 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, the safest course is to treat the funds as abandoned property and proceed as discussed above.

C. Bank Charges and Fees

Rule 1.15(d)(5) [2010 Rule 1.15(b)] specifically provides that “[a] lawyer may deposit the lawyer's own funds in the trust account for the sole purpose of paying bank service charges on that account, but only in an amount necessary for that purpose."  For IOLTA account, the Lawyers' Trust Fund will pay certain "[a]llowable reasonable fees," defined in Rule 1.15(f)(5) [2010 Rule 1.15(h)(5)] 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.”  

D. Trust Property Other Than Cash

When the lawyer receives non-cash trust property, as with money held in trust, the lawyer must (1) identify or label it as such; (2) keep it separate from the lawyer's own property; and (3) take appropriate safeguards to protect and preserve it. This means that the lawyer should identify and label the client 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 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 2010 Rule 1.15, cmt. [1].

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 should 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 item(s) will be held:_____________________

A. Practice Tips for Opening and Operating the Trust Account

1. Form - Generally, the trust account can be a savings account, checking account or certificate of deposit at a federally insured bank or savings and loan. For IOLTA trust accounts, the account must be an interest-bearing or dividend-bearing account and an account that is subject to withdrawal promptly upon request (a corporate/business checking account, such as a NOW account). See Rule 1.15(d)(1) [2010 Rule 1.15(f) & (h)(1)].
   
   

2. Location - The account must be maintained in the state where the lawyer’s office is located or elsewhere with the client’s consent.  See Rule 1.15(a).  If the trust account is located outside of Illinois because the lawyer is licensed and practices in that other jurisdiction, care must taken that the trust account complies with that state’s trust accounting rules.  See Rule 8.5(b) (choice of law).  In situations where the client wants the trust account opened for the client’s benefit in another state, it is advisable to get the client’s consent in writing.

For IOLTA trust accounts, the trust account must be established with a federally insured bank, savings bank or savings and loan association authorized by federal or state law to do business in Illinois and certified by the Lawyers Trust Fund of Illinois to maintain IOLTA trust accounts.  See Rule 1.15(d)(1) [2010 Rule 1.15(f)(1)]

CASH RECEIPTS JOURNAL TRUST ACCOUNT NO. ____________________
DATE	SOURCE	CLIENT	DEPOSIT	AMOUNT

2. Cash disbursements journal. This journal lists chronologically all trust account disbursements and identifies the recipient, purpose and date of each disbursement.

CASH DISBURSEMENTS JOURNAL TRUST ACCOUNT NO. _________________
DATE	CHECK	PAYEE	PURPOSE	CLIENT	AMOUNT

3. Client subsidiary ledger. This ledger records chronologically for each client all receipts, disbursements and balances, and includes:

1. Separate page for each client.

2. Posting transactions (receipts and disbursements) by date, purpose and amount.

3. If the account is a separate one for the client's benefit or if the account allocates interest to each client, any net interest (accrued interest less service charges) credited to the client.

CLIENT SUBSIDIARY LEDGER PAGE Name of Client: _____________________________________ Legal Matter/Adverse Party: ___________________________ File or Case Number: ________________________________
DATE	DESCRIPTION OF TRANSACTION	CHECK	FUNDS PAID	FUNDS RECEIVED	BALANCE

4. Checkbook register. A trust account checkbook register is like any other checkbook register. It records deposits and trust account checks in sequential order. It also maintains a running balance.

CHECKBOOK REGISTER
CHECK	DATE	PAYEE OR DEPOSIT SOURCE	AMOUNT OF CHECK	DEPOSIT AMOUNT	BALANCE

3. Retention of Records

All financial records related to the lawyer's practice of law must be maintained for a minimum of seven years after the fiduciary obligation ends (Rule 1.15(a); S.Ct.Rule 769). 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 (S.Ct.Rule 769(2)).

B. Depositing Trust Account Funds

1. Deposit client funds in the 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. Client subsidiary ledger entry; and

d. Cash receipts journal entry.

2. Checks payable jointly to the client and the lawyer should be deposited in the trust account and not endorsed over to the client.

C. Disbursing Trust Account Funds

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1.  Disbursements to the client or on behalf of the client must be made promptly after the deposit has been credited. Generate the following:

1. Check made payable to the client or third party, with notation of the client matter and purpose in memo portion of the check;
   
   

2. Checkbook register disbursement entry;
   
   

3. Client subsidiary ledger entry; and
   
   

4. Cash disbursements journal entry.

2. Proper Methods For Withdrawing Legal Fees

1. Before an earned legal fee may properly be withdrawn from a 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 trust account.
   
   

2. Moreover, if no dispute over the fee exists, the lawyers' fees which are justly due and owing, may not remain in the trust account, but MUST be promptly withdrawn. 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 trust account. See In re Enstrom, 104 Ill.2d 410, 472 N.E.2d 446 (1984).
   
   

3. Disbursements out of the 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 trust account for the lawyer's own personal or business expenses. This could potentially subject the trust account to attachment by the lawyer's creditors, thereby endangering existing client funds and the status of the account as a trust account.

D. Reconciling Account Records with Monthly Bank Statements

1. Before a trust account can be reconciled with the monthly bank statement, the balances of:

• the cash receipts and cash disbursement journals;
  
  

• the client subsidiary ledgers; and
  
  

• the checkbook register

must equal one another.

a. Add together the monthly ending balances of all client subsidiary ledgers.

b. 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, subtract the cash disbursements journal balance for that month.

c. Take the balance in the checkbook register at the end of the month in question.

d. The figures for a, b, and c must be equal. If they are not, look for entries that don't match or addition or subtraction errors, until all three figures are the same.

2. Interest and Bank Costs

a. For IOLTA accounts, interest credits are paid by the financial institution directly to the Lawyers Trust Fund, and certain legitimate and reasonable bank costs are paid by the 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 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. If you have an account where interest is credited to individual clients whose funds are held in the account, 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 client subsidiary ledgers, your cash receipts journal, and your checkbook register.

3. Monthly Trust Account Reconciliation.

The bank statement balance is reconciled with the other 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 (2)(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 (1)(a), (b) and (c) above -- the client subsidiary ledgers balance, the cash disbursements and receipts journals balance, and the checkbook register balance.

E. Sample Trust Account Transactions, Trust Account Trial Balances and Trust Account Reconciliation

1. Sample Trust Account Transactions

Julia Dolan is a sole practitioner. On September 30, 1994, the bank statement balance for Dolan's IOLTA trust account is $10,241.66. These funds are identified as follows:

a. $10,000 represents escrow money which was deposited into Dolan's trust account on September 1, 1994, on behalf of her client Ron Roper.

b. $200 represents funds of Julia Dolan which were deposited into the 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 September which has yet to be paid by the bank to IOLTA.

The only subsidiary ledgers with outstanding balances on September 30, 1994, are those for Roper and Dolan. Because this is an IOLTA account, the interest figure ($41.66) does not appear on the subsidiary ledger.

CLIENT SUBSIDIARY LEDGER PAGE TRUST ACCOUNT NO. 123-456 Name of Client: Ron Roper Legal Matter/Adverse Party: Real Estate Escrow - Hadley File or Case Number: 94-161
DATE	DESCRIPTION OF TRANSACTION	CHECK	FUNDS PAID	FUNDS RECEIVED	BALANCE
09/01/94	Deposit - Escrow			$10,000	$10,000

CLIENT SUBSIDIARY LEDGER PAGE 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
01/01/94	Minimum balance amount to avoid service charge			$200	$200

On October 1, 1994, Joan Smith, a client, gives Dolan a $1000 retainer. The fee agreement with Smith provides that the retainer is to be placed in the trust account and withdrawn as earned.

CLIENT SUBSIDIARY LEDGER PAGE TRUST ACCOUNT NO. 123-456 Name of Client: Joan Smith Legal Matter/Adverse Party: Marital Dissolution File or Case Number: 94-1057
DATE	DESCRIPTION OF TRANSACTION	CHECK	FUNDS PAID	FUNDS RECEIVED	BALANCE
01/01/94	Retainer - Smith			$1,000	$1,000

CASH RECEIPTS JOURNAL TRUST ACCOUNT NO. 123-456 OCTOBER 1994
DATE	SOURCE	CLIENT	DEPOSIT	AMOUNT
10/01/94	Smith check #2398	Joan Smith	50062	$1,000

On October 5, 1994, client James Johnson is ordered to endorse his federal and state tax refunds of $2,000 and deposit them into Dolan's trust account. The refunds will be distributed upon further order of the court.

CASH SUBSIDIARY LEDGER PAGE TRUST ACCOUNT NO. 123-456 Name of Client: James Johnson Legal Matter/Adverse Party: Dissolution File or Case Number: 93-1058
DATE	DESCRIPTION OF TRANSACTION	CHECK	FUNDS PAID	FUNDS RECEIVED	BALANCE
10/05/94	Fed/State Refund			$2,000	$2,000

CASH RECEIPTS JOURNAL TRUST ACCOUNT NO. 123-456 OCTOBER 1994
DATE	SOURCE	CLIENT	DEPOSIT	AMOUNT
10/01/94	Smith check #2398	Joan Smith	50062	$1,000
10/05/94	Fed & State Refund	James Johnson	50145	$2,000

On October 13, 1994, 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 October 20, 1994, Dolan makes the disbursements in accordance with the settlement statement after allowing seven days for the insurance company check to clear.

CLIENT SUBSIDIARY LEDGER PAGE TRUST ACCOUNT NO. 123-456 Name of Client: Bill Grey Legal Matter/Adverse Party: Personal Injury-Ace Ins. Co. File or Case Number: 91-1002
DATE	DESCRIPTION OF TRANSACTION	CHECK	FUNDS PAID	FUNDS RECEIVED	BALANCE
10/13/94	Ace Insurance Co.			$15,000	$15,000
10/20/94	Court Reporter Inc.	1005	$400		$14,600
10/20/94	Process Server Inc.	1006	$60		$14,540
10/20/94	Dr. Bailey	1007	$340		$14,200
10/20/94	Bill Grey	1008	$9,200		$5,000
10/20/94	Julia Dolan-Fees	1009	$5,000		$0

CASH RECEIPTS JOURNAL TRUST ACCOUNT NO. 123-456 OCTOBER 1994
DATE	SOURCE	CLIENT	DEPOSIT	AMOUNT
10/01/94	Smith check #2398	Joan Smith	50062	$1,000
10/05/94	Fed & State Refund	James Johnson	50145	$2,000
10/13/94	Ace Insurance Co.	Bill Grey	62001	$15,000

CASH DISBURSEMENTS JOURNAL TRUST ACCOUNT NO. 123-456 OCTOBER 1994
DATE	CHECK	PAYEE	PURPOSE	CLIENT	AMOUNT
10/20/94	1005	Court Reporter Inc.	Costs	Grey	$400
10/20/94	1006	Process Server Inc.	Costs	Grey	$60
10/20/94	1007	Dr. Bailey	Costs	Grey	$340
10/20/94	1008	Bill Grey	Settlement	Grey	$9,200
10/20/94	1009	Julia Dolan	Fees	Grey	$5,000

CLIENT SUBSIDIARY LEDGER PAGE TRUST ACCOUNT NO. 123-456 Name of Client: James Johnson Legal Matter/Adverse Party: Dissolution File or Case Number: 93-1058
DATE	DESCRIPTION OF TRANSACTION	CHECK	FUNDS PAID	FUNDS RECEIVED	BALANCE
10/05/94	Federal/State Refund			$2,000	$2,000
10/21/94	Mrs. James Johnson	1010	$1,500		$500

CASH DISBURSEMENTS JOURNAL TRUST ACCOUNT NO. 123-456 OCTOBER 1994
DATE	CHECK	PAYEE	PURPOSE	CLIENT	AMOUNT
10/20/94	1005	Court Reporter Inc.	Costs	Grey	$400
10/20/94	1006	Process Server Inc.	Costs	Grey	$60
10/20/94	1007	Dr. Bailey	Costs	Grey	$340
10/20/94	1008	Bill Grey	Settlement	Grey	$9,200
10/20/94	1009	Julia Dolan	Fees	Grey	$5,000
10/21/94	1010	Mrs. J. Johnson	Ct. Order	Johnson	$1,500

On October 31, 1994, Dolan is retained by Sam Spade and paid a $5,000 retainer which under the fee agreement is to be deposited in the trust account and withdrawn as earned.

CLIENT SUBSIDIARY LEDGER PAGE TRUST ACCOUNT NO. 123-456 Name of Client: Sam Spade Legal Matter/Adverse Party: Business litigation-Olson File or Case Number: 94-1096
DATE	DESCRIPTION OF TRANSACTION	CHECK	FUNDS PAID	FUNDS RECEIVED	BALANCE
10/31/94	Retainer			$5,000	$5,000

CASH RECEIPTS JOURNAL TRUST ACCOUNT NO. 123-456 OCTOBER 1994
DATE	SOURCE	CLIENT	DEPOSIT	AMOUNT
10/01/94	Smith check #2398	Joan Smith	50062	$1,000
10/05/94	Fed/State Refund	James Johnson	50145	$2,000
10/13/94	Ace Insurance Co.	Bill Grey	62001	$15,000
10/31/94	Spade Retainer	Sam Spade	64662	$5,000

On October 31, 1994, Dolan bills Joan Smith $250 for court costs paid by Dolan on Smith's behalf during October and issues a trust account check for that amount made payable to herself.

CLIENT SUBSIDIARY LEDGER PAGE TRUST ACCOUNT NO. 123-456 Name of Client: Joan Smith Legal Matter/Adverse Party: Marital Dissolution File or Case Number: 94-1057
DATE	DESCRIPTION OF TRANSACTION	CHECK	FUNDS PAID	FUNDS RECEIVED	BALANCE
10/01/94	Retainer-Smith			$1,000	$1,000
10/31/94	Costs-J. Dolan	1011	$250		$750

CASH DISBURSEMENTS JOURNAL TRUST ACCOUNT NO. 123-456 OCTOBER 1994
DATE	CHECK	PAYEE	PURPOSE	CLIENT	AMOUNT
10/20/94	1005	Court Reporter Inc.	Costs	Grey	$400
10/20/94	1006	Process Server Inc.	Costs	Grey	$60
10/20/94	1007	Dr. Bailey	Costs	Grey	$340
10/20/94	1008	Bill Grey	Settlement	Grey	$9,200
10/20/94	1009	Julia Dolan	Costs	Grey	$5,000
10/21/94	1010	Mrs. J. Johnson	Ct. Order	Johnson	$1,500
10/31/94	1011	Julia Dolan	Costs	J. Smith	$250

2. Sample Trust Account Trial Balances

Before Dolan's IOLTA trust account can be reconciled, the checkbook register, the cash balance and the subsidiary ledgers must balance.

a. Checkbook Register Balance. On October 31, 1994, Dolan's checkbook register balance is $16,450.

CHECKBOOK REGISTER
CHECK NO.	DATE	PAYEE OR DEPOSIT SOURCE	CHECK AMOUNT	DEPOSIT AMOUNT	BALANCE
	9/30/94	Balance			$10,200
	10/01/94	Joan Smith		$1,000	$11,200
	10/05/94	Johnson Tax Ref		$2,000	$13,200
	10/13/94	Ace Ins. Co.		$15,000	$28,200
1005	10/20/94	Court Reporter	$400		$27,800
1006	10/20/94	Process Server	$60		27,740
1007	10/20/94	Dr. Bailey	$340		$27,400
1008	10/20/94	Bill Grey	$9,200		$18,200
1009	10/20/94	Julia Dolan	$5,000		$13,200
1010	10/21/94	Mrs. Johnson	$1,500		$11,700
	10/31/94	Sam Spade		$5,000	$16,700
1011	10/31/94	Julia Dolan	$250		$16,450

b. Subsidiary Ledgers Trial Balance. Dolan's subsidiary ledgers trial balance for October is calculated by totaling all of the subsidiary ledgers that have an outstanding balance on October 31, 1994.

SUBSIDIARY LEDGER TRIAL BALANCE PERIOD OF 10/1/94 - 10/31/94 TRUST ACCOUNT NO. 123-456
CLIENT	BALANCE ON 10/31/94
Julia Dolan	$200
Ron Roper	$10,000
Joan Smith	$750
James Johnson	$500
Sam Spade	$5,000
Trial Balance Total	$16,450

c. Cash Balance. Dolan's cash balance for October is calculated by taking the cash balance from September and adding the total October receipts and subtracting the total October disbursements.

CASH RECEIPTS JOURNAL TRUST ACCOUNT NO. 123-456 OCTOBER 1994
DATE	SOURCE	CLIENT	DEPOSIT	AMOUNT
10/01/94	Smith check #2398	Joan Smith	50062	$1,000
10/05/94	Fed & State Refund	James Johnson	50145	$2,000
10/13/94	Ace Insurance Co.	Bill Grey	62001	$15,000
10/31/94	Spade Retainer	Sam Spade	64662	$5,000
11/01/94		OCTOBER TOTAL		$23,000

CASH DISBURSEMENTS JOURNAL TRUST ACCOUNT NO. 123-456 OCTOBER 1994
DATE	CHECK	PAYEE	PURPOSE	CLIENT	AMOUNT
10/20/94	1005	Court Reporter	Costs	Grey	$400
10/20/94	1006	Process Server	Costs	Grey	$60
10/20/94	1007	Dr. Bailey	Costs	Grey	$340
10/20/94	1008	Bill Grey	Settlement	Grey	$9,200
10/20/94	1009	Julia Dolan	Costs	Grey	$5,000
10/21/94	1010	Mrs. Johnson	Ct. Order	Johnson	$1,500
10/31/94	1011	Julia Dolan	Costs	Smith	$250
11/01/94			OCTOBER TOTAL		$16,750

CASH BALANCE PERIOD OF 10/01/94 - 10/31/94 TRUST ACCOUNT NO. 123-456
Cash Balance from September		$10,200
Plus October Receipts	$23,000
Minus October Disbursements		($16,750)
October Cash Balance	$16,450

d. October Trial Balances. The checkbook register balance, cash balance, and subsidiary ledgers trial balance must be identical.

Checkbook Register Balance $16,450
Cash Balance $16,450
Subsidiary Ledgers Trial Balance $16,450

3. Sample Monthly Trust Account Reconciliation

After the checkbook register, cash balance, and subsidiary ledgers have been balanced, the October bank statement is reconciled with the October 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 10/01 THRU 10/31/94
OPENING BALANCE	DEPOSITS	WITHDRLS INTEREST	SERVICE & CHECKS	CLOSING CHARGE	BALANCE
$10,241.66	$18,000.00	$62.50	$16,451.66	$0.00	$11,852.50
*******************************************************************************
CHECKING ACCOUNT TRANSACTIONS
DEPOSITS				DATE	AMOUNT
50062				10/01/94	$1,000.00
50145				10/05/94	$2,000.00
62001				10/13/94	$15,000.00
Net Interest For October				10/31/94	$62.50
WITHDRAWALS				DATE	AMOUNT
Net Interest paid to IOLTA for September				10/31/94	$41.66
CHECKS				BALANCES
ITEM	DATE	AMOUNT		DATE	BALANCE
1005	10/25/94	$400.00		10/06/94	$13,241.66
1006	10/24/94	$60.00		10/13/94	$28,241.66
1008*	10/21/94	$9,200.00		10/26/94	$12,081.66
1009	10/23/94	$5,000.00		10/31/94	$11,852.50
1010	10/26/94	$1,500.00
1011	10/31/94	$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 balances. (See supra part VI.D.2, Reconciling Account Records with Monthly Statements.) 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 10/1/94 - 10/31/94 TRUST ACCOUNT NO. 123-456
Checkbook Balance		$16,450.00
Cash Balance From Journals		$16,450.00
Subsidiary Ledger Trial Balance		$16,450.00
Bank Statement
Balance on 10/31/94	$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 trust account records. Lawyers may consult with a reputable accountant to help them set up an accounting system that they can understand and follow.

1990 RULE 1.15 Safekeeping Property  [Will be replaced by 2010 Rule 1.15 (adopted July 1, 2009; eff. Jan. 1, 2010) below]

(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 in a separate account or accounts maintained in the state where the lawyer’s office is situated, or elsewhere with the consent of the client or third person. Other property shall be identified as such and appropriately safeguarded. Complete records of such 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.

(b) 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

(c) When in the course of representation a lawyer is in possession of property in which both the lawyer and another person claim interests, the property shall be kept

(d) All nominal or short-term funds of clients or third persons held by a lawyer or law firm, including advances for costs and expenses, and funds belonging in part

(e) 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.

(f) Definitions

(1) “IOLTA account” means an interest- or dividend-bearing trust account benefiting 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 (d) and from which funds may be withdrawn upon request as soon as permitted by law.

(g) 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 February 8, 1990, effective August 1, 1990; amended July 18, 1990, effective August 1, 1990; amended April 1, 1998, effective immediately; amended October 1, 1998, effective immediately; amended December 1, 1998, effective immediately; amended January 25, 2007, effective June 1, 2007; amended March 20, 2009, effective immediately.