Introduction
A lawyer may end up with client and third party funds in his or her possession in a variety of ways. Probably the most common way is for a lawyer to receive a settlement or judgment check made payable to the lawyer, his or her client, and a subrogation lien holder in a personal injury action. Lawyers also end up with client and third party funds in other ways. In a divorce, a lawyer may be asked by the court to sell the real estate and hold the funds from the sale of the real estate until the court makes its final decision on the property settlement. A lawyer may also ask a client to give him an advance on the lawyer’s fee and bill against this advance on an hourly basis. Another common way for lawyers to end up with client funds is for the lawyer to ask a client to give him or her an advance to pay the expenses of litigating a case.
These examples are not a comprehensive list of how a lawyer ends up with client and/or third party funds. There are numerous other ways that a lawyer may end up with client and/or third party funds in his or her possession. Because of their duties as fiduciaries, lawyers must treat these funds with special care. This special care begins with lawyers properly designating funds as belonging to the lawyer, the client, and to a third party. Lawyers’ fiduciary duties also require lawyers to properly maintain client funds and third party funds separate from the lawyer’s funds in a trust account. Lawyers’ fiduciary duties are spelled out in several rules.
- Prof. Cond. R. 1.15: Safekeeping Property
- Prof. Cond. R. 1.16(d): Duty to refund unearned fees at the termination of representation
- Prof. Cond. R. 5.1: Responsibilities of a Partner or Supervisory Lawyer
- Prof. Cond. R. 5.2: Responsibilities of a Subordinate Lawyer
- Prof. Cond. R. 5.3: Responsibilities Regarding Nonlawyer Assistants
- Prof. Cond. R. 8.4(b): Misconduct; criminal acts
- Prof. Cond. R. 8.4(c): Misconduct; dishonesty, fraud, deceit or misrepresentation
- Indiana Code 35-43-4-2: Theft * I.C. 35-43-4-3: Conversion
- Admis. Disc. R. 23, §29(a): Trust Account Recordkeeping Requirements
- Admis. Disc. R. 23, §29(b) through (g): Trust Account Overdraft Notification
- Admis. Disc. R. 23, §30: Audits of Trust Accounts
- Rules Governing Attorney Trust Account Overdraft Reporting
Learn more about managing an attorney trust account in our continuing legal education guide: Trust Account Management: Handling Client And Third Party Funds
Trust Account Forms
- Attorney Trust Account Notification [Lawyers must use this form to notify their banks that their non-IOLTA trust accounts are subject to overdraft reporting.]
- IOLTA Forms from the Admission & Discipline Rules