TOPIC F: TRUST ACCOUNTS 2016 P.R. Prof. Janicke. CLIENTS’ FUNDS IN LAWYER’S CUSTODY MUST BE PROTECTED LAWYERS OFTEN HAVE CLIENT FUNDS –ADVANCES ON FEES.

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Presentation transcript:

TOPIC F: TRUST ACCOUNTS 2016 P.R. Prof. Janicke

CLIENTS’ FUNDS IN LAWYER’S CUSTODY MUST BE PROTECTED LAWYERS OFTEN HAVE CLIENT FUNDS –ADVANCES ON FEES OR EXPENSES –SETTLEMENTS –PAYMENTS OF JUDGMENTS 2016Topic F -- Trust Accounts2

THESE FUNDS MUST BE -- –KEPT IN A SAFE PLACE, USUALLY AN INSURED BANK R –IN AN ACCOUNT SEGREGATED FROM LAWYER’S OWN ACCOUNT R –THIS SAFE PLACE IS COMMONLY CALLED A “TRUST ACCOUNT” 2016Topic F -- Trust Accounts3

COMMINGLING IS A VERY LARGE CAUSE OF BAR DISCIPLINE CASES BIG ON MPRE –A BREACH OF ETHICS, REGARDLESS OF WHETHER OR NOT ANY CLIENT FUNDS WERE PERMANENTLY STOLEN OR PUT BACK 2016Topic F -- Trust Accounts4

USUALLY ONLY ONE TRUST ACCOUNT IS NEEDED CAN BE FOR ALL CLIENTS –CAREFUL RECORDS NEEDED THE KEY IS: KEEPING ALL CLIENTS’ FUNDS AWAY FROM LAWYER’S FUNDS 2016Topic F -- Trust Accounts5

ADVANCE vs. RETAINER AN ADVANCE IS USUALLY AGAINST FUTURE HOURLY FEES –THE ADVANCE BELONGS TO THE CLIENT UNTIL EARNED BIT-BY-BIT A “RETAINER” IS A NON-REFUNDABLE FEE PAID TO ASSURE LAWYER AVAILABILITY –IT CAN BE ARRANGED FOR HOURLY FEES TO BE BILLED AGAINST THE RETAINER UNTIL EXHAUSTED; BUT IS ALWAYS NON-REFUNDABLE 2016Topic F -- Trust Accounts6

ADVANCES MUST BE HELD SEGREGATED (TRUST ACCOUNT) RETAINERS BELONG TO THE LAWYER FROM THE START, AND NEED NOT BE SEGREGATED 2016Topic F -- Trust Accounts7

*** NO BORROWING FROM THE TRUST ACCOUNT! LAWYERS ARE OFTEN TEMPTED, ESP. WHEN SHORT OF CASH IF THEY BORROW UNEARNED AMOUNTS, THEY ARE SUBJECT TO DISCIPLINE – EVEN DISBARMENT!! *** PUTTING THE MONEY BACK IS NOT A DEFENSE! 2016Topic F -- Trust Accounts8

NO ASSUMPTIONS ABOUT RIGHT TO TAKE IF THERE IS ANY DISPUTE ABOUT LEGITIMACY OF EARNED PORTION, LAWYER CANNOT TAKE ANY DISPUTED AMOUNT OUT OF TRUST UNTIL THE DISPUTE IS FINALLY RESOLVED 2016Topic F -- Trust Accounts9

EXAMPLE $1500 IS IN TRUST ACCOUNT FOR CLIENT X LAWYER CLAIMS HE HAS BILLED AND EARNED $1000 SO FAR –BUT CLIENT X SAYS $600 SO FAR LAWYER CAN NOW MOVE $600 TO HER OWN ACCOUNT –MUST AWAIT RESOLUTION FOR THE $400 IN ISSUE 2016Topic F -- Trust Accounts10

SHORT RULE: LAWYER CAN TAKE ONLY UNDISPUTED AMOUNTS FROM A TRUST ACCOUNT –DOES NOT MATTER IF THE CLIENT IS BEING “UNREASONABLE” –LAWYER IS A FIDUCIARY 2016Topic F -- Trust Accounts11