These summaries were prepared by McGuireWoods LLP lawyer Thomas E. Spahn. They are based on the letter opinions issued by the Virginia State Bar. Any editorial comments reflect Mr. Spahn's current personal views, and not the opinions of the Virginia State Bar, McGuireWoods or its clients. 
 
 Back to main menu
  Topic: 40 - Trust Accounts
LEO NumTopicsSummaryDate
0437

printPrint
40-Trust Accounts

58-Real Estate Lawyers

A builder's lawyer may undertake a dry closing only if the lawyer explains all the risks to the seller and obtains the seller's consent. 11/17/1981
0697

printPrint
40-Trust Accounts

A deceased lawyer's trust account may be paid to the lawyer's estate if a diligent effort has not uncovered the clients to whom the money is owed and the money is kept in an interest-bearing account until it is unlikely that any client would claim it. [The lawyer should also check any escheat laws.] 5/10/1985
0999

printPrint
8-Bills and Fees

40-Trust Accounts

A law firm may allow clients to pay with a credit card, as long as all payments are deposited in a trust account and the lawyer does not withdraw any fees until deposit checks have cleared. 11/13/1987
1256

printPrint
29-Advancing Fees and Costs

40-Trust Accounts

A law firm may not arrange for a line of credit (under which the firm might ultimately become responsible for the loan) that would enable the firm to immediately disburse funds from a trust account upon personal injury settlements, because: the firm would be acquiring an interest in the outcome of the litigation; the lawyer would be advancing money other than appropriate litigation expenses; and it would commingle the lawyer's funds and the client's funds. 7/25/1989
1440

printPrint
40-Trust Accounts

A law firm may not earn interest or receive dividends on a client's funds held in a trust account, and may not obtain credit based on the funds being held in a trust account. 11/18/1991
0831

printPrint
40-Trust Accounts

A law firm may not place funds in an interest-bearing account that will generate an automatic administrative fee, even if the interest earned by the funds will be credited against the administrative fee. 10/8/1986
0280

printPrint
40-Trust Accounts

A law firm may not receive the interest earned on funds held in a trust or escrow account. 3/2/1976
1797

printPrint
40-Trust Accounts

58-Real Estate Lawyers

A law firm may not write checks on a trust account during the period in which the bank put the entire trust account on hold, even though the bank's hold also blocked access to funds other than the checks that had just been deposited, and even though the lawyers had complied with the Wet Settlement Act. Despite what could be seen as the unreasonable nature of the bank's policy, the law firm may not write checks that it knows will bounce.6/30/2004
1579

printPrint
32-Lawyers Acting in Other Roles (Miscellaneous)

40-Trust Accounts

A lawyer acting as a fiduciary must comply with the Canon 9 rules, although the application of IOLTA raises a legal issue. 4/11/1994
0704

printPrint
40-Trust Accounts

A lawyer and client must run a settlement check through the lawyer's trust account. 6/26/1985
1673

printPrint
8-Bills and Fees

39-Miscellaneous

40-Trust Accounts

44-Conflicts - Miscellaneous

A lawyer attempting to locate former clients to whom trust money is owed may use some of the trust money to compensate an investigator aiding in the search, as long as the compensation is reasonable and explained to the located clients (hiring an investigator is not a necessary step, because "due diligence is all that is required of an attorney trying to locate a client"). 5/16/1996
0832

printPrint
40-Trust Accounts

A lawyer holding minimal funds for clients with whom the lawyer has had no recent contact and who cannot now be located may dispose of the funds pursuant to Va. Code § 55-210.1. 10/23/1986
0249

printPrint
27-Litigation Tactics (Including Misrepresentations, Tape Recordings)

40-Trust Accounts

A lawyer may demand a written assurance from opposing counsel that money will be placed in escrow. 10/2/1974
0585

printPrint
8-Bills and Fees

40-Trust Accounts

A lawyer may deposit earned fees into the lawyer's general operating account. 6/14/1984
1510

printPrint
40-Trust Accounts

A lawyer may deposit personal funds in a trust account "reasonably sufficient" to pay bank charges, although banks' differing procedures make it impossible to establish a "specific maximum amount that may be deposited." 2/9/1993
0454

printPrint
40-Trust Accounts

A lawyer may disburse funds from a trust account upon receiving and depositing a certified check.4/12/1982
0868

printPrint
40-Trust Accounts

A lawyer may distribute earned funds from a trust account as long as the client consents and the court directs it, even if the client's father (who deposited the money) has neither given nor denied permission to distribute the money. 2/2/1987
0558

printPrint
8-Bills and Fees

16-Lawyer's Personal Interests

38-Fee Splitting

40-Trust Accounts

A lawyer may engage in a "barter" arrangement in which the lawyer renders services in return for other goods, as long as: the lawyer does not share legal fees (in cash or in kind) with any non-lawyers; the client consents; the legal fees are reasonable; and the lawyer keeps the legal fees in a trust account (or segregated in the case of goods) until the fees are earned. [Under Rule 1.8(a), a lawyer may not enter into a "business transaction" with a client unless the client is given an opportunity to seek independent advice, and there has been full disclosure and consent in writing.]4/10/1984
0818

printPrint
31-Protecting and Disclosing Confidences and Secrets

40-Trust Accounts

A lawyer may identify clients with unclaimed trust funds because disclosure is required by law. 9/3/1986
0584

printPrint
16-Lawyer's Personal Interests

40-Trust Accounts

A lawyer may maintain a personal non-legal bank account entitled "Trust Account." 5/28/1984
0753

printPrint
40-Trust Accounts

58-Real Estate Lawyers

A lawyer may make disbursements from a trust account in accordance with the Wet Settlement Act. 2/13/1986
0281

printPrint
40-Trust Accounts

58-Real Estate Lawyers

A lawyer may not advance commissions to real estate brokers either out of a trust account or the lawyer's own funds. 3/25/1976
0898

printPrint
40-Trust Accounts

A lawyer may not deposit a check in the firm's trust account after the bank has closed and immediately write a check on that amount. 4/1/1987
1116

printPrint
40-Trust Accounts

58-Real Estate Lawyers

A lawyer may not disburse a real estate builder's proceeds and a construction loan payoff before recording of the lender's deed of trust. 7/6/1988
1248

printPrint
40-Trust Accounts

A lawyer may not disburse any money from a trust account until the waiting period for the settlement check has lapsed.6/13/1989
0813

printPrint
40-Trust Accounts

A lawyer may not disburse funds from a real estate trust account unless the recipient is entitled to receive them. 10/14/1986
1255

printPrint
40-Trust Accounts

58-Real Estate Lawyers

A lawyer may not disburse funds from a trust account until they are irrevocably credited to the account. A law firm may agree to waive the right to certified funds in all closings occurring between the lender and the law firm's clients as long as all the transactions comply with the Wet Settlement Act (Va. Code § 6.1-2.10). 7/25/1989
0392

printPrint
40-Trust Accounts

A lawyer may not earn interest on funds held in the lawyer's trust account. 12/15/1980
0315

printPrint
40-Trust Accounts

A lawyer may not earn interest on money held in a trust or escrow account. 4/4/1979
1764

printPrint
8-Bills and Fees

38-Fee Splitting

40-Trust Accounts

A lawyer may not enter into a fixed fee retainer arrangement in which a finance company pays the lawyer the fixed fee amount (minus a discount) at the beginning of the case, with the client being responsible for making monthly payments to the finance company for the full fee amount plus interest, because the discount retained by the finance company at the beginning of the case amounts to impermissible fee-sharing; any advanced fee must be kept in the lawyer's trust account until the lawyer has "performed the corresponding services."5/6/2002
0650

printPrint
8-Bills and Fees

40-Trust Accounts

A lawyer may not enter into an agreement in which advanced fees will be placed in an interest-bearing account, with both interest and principal being paid to the lawyer. 1/3/1985
0367

printPrint
16-Lawyer's Personal Interests

40-Trust Accounts

A lawyer may not ethically establish a trust account at a particular bank under an arrangement in which the lawyer receives payment for placing the account there. 4/23/1980
0565

printPrint
40-Trust Accounts

A lawyer may not maintain an account in any bank unwilling to notify the Virginia State Bar of returned checks. 5/2/1984
0751

printPrint
40-Trust Accounts

A lawyer may not write checks on an escrow account until the funds are disbursable. 12/4/1985
ABA-348

printPrint
40-Trust Accounts

A lawyer may participate in a state-authorized program that pays interest on trust accounts to tax-exempt organizations. 7/23/1982
0639

printPrint
40-Trust Accounts

A lawyer may refuse to release trust funds being held pursuant to court order. 12/19/1984
0498

printPrint
8-Bills and Fees

16-Lawyer's Personal Interests

40-Trust Accounts

A lawyer may take a promissory note from a client as evidence of a fee as long as the amount and terms are reasonable; the lawyer may assign or discount the note if the client consents; the lawyer must place in the trust account any amounts paid before the fee is earned. 2/15/1983
1280

printPrint
40-Trust Accounts

A lawyer must place in a trust account any funds that are in dispute between the client and a previous lawyer. 9/21/1989
0919

printPrint
40-Trust Accounts

A lawyer need not obtain written consent to deposit a client's funds in an IOLTA account, but must obtain the client's consent to deposit money in an IOLTA account if the funds might draw appreciable interest elsewhere and will not be needed for a long time. 6/11/1987
1372

printPrint
40-Trust Accounts

A lawyer need not open a trust account if the lawyer does not receive any money belonging to clients or any advanced legal fees that have not yet been earned. [Rule 1.15 now applies whenever a lawyer holds money as a fiduciary.]7/24/1990
1468

printPrint
21-Reporting Another Lawyer's Unethical Conduct

31-Protecting and Disclosing Confidences and Secrets

40-Trust Accounts

73-Family Law Lawyers

A lawyer representing the ex-wife of another lawyer in a divorce case found irregularities in the other lawyer's trust accounts. The ex-wife asked the lawyer to keep the irregularities secret, because revealing them could jeopardize the ex-wife's support payments. Although generally trust account violations must be reported, in this case the lawyer would violate the duty of confidentiality if the disclosed the husband's trust account irregularities to the Bar (the court had already been advised of the irregularities, and had placed all the information under seal). [The Bar did not discuss the circumstances under which the court had been advised of the trust irregularities.] [If information about the ethics violation is a client confidence, a lawyer may report the other lawyer's misconduct only if the client consents under Rule 1.6(c)(3); the lawyer considering whether to report must consult with the client under that Rule.]12/14/1992
0548

printPrint
40-Trust Accounts

A lawyer who cannot determine to whom leftover trust account money should be paid may transfer the money to the lawyer's own account after diligently trying to determine to whom the money is owed and waiting until it is reasonable to conclude that no one will claim the money. [The lawyer should also check any escheat laws.] 3/1/1984
1807

printPrint
8-Bills and Fees

40-Trust Accounts

A lawyer who has not been paid may: (1) garnish any of the former client's money being held in the trust account of a successor lawyer (the money should not be called a "retainer" which involves the payment of money "to insure the attorney's availability for future legal services" and must therefore not be placed in a trust account because it is earned upon payment); (2) undertake discovery of documents relating to the client's payments to the successor lawyer, although the discovery "should not seek more confidential information from the new attorney than is necessary for collection." 9/20/2004
1469

printPrint
40-Trust Accounts

50-Lawyer-Owned Businesses

58-Real Estate Lawyers

A lawyer who is operating a title company to conduct residential settlements: is subject to the UPL rules if the title company prepares legal documents such as notes and deeds; must comply with the trust account rules if an attorney-client relationship exists by reason of preparation of such documents (including the prohibition on the lawyer or law firm earning interest on client funds held in trust); must obtain clients' consent before retaining any interest earned by client money held by the title company. 6/22/1992
0331

printPrint
14-Ownership of Files and Attorney Lien Issues

40-Trust Accounts

A lawyer who receives real estate trust funds from a non-client may not use the funds to pay an amount owed to the lawyer, unless the non-client consents. 7/30/1979
0415

printPrint
40-Trust Accounts

58-Real Estate Lawyers

A lawyer whose real estate escrow account check was never cashed may withdraw funds from the trust account and place them in a separate interest-bearing account pending resolution of the lost check. 5/20/1981
0695

printPrint
40-Trust Accounts

A lawyer with an office in the District of Columbia who represents Virginia clients must open a trust account in a Virginia bank that complies with the Virginia ethics rules. 5/22/1985
1564

printPrint
16-Lawyer's Personal Interests

18-Consent and Prospective Waivers

31-Protecting and Disclosing Confidences and Secrets

40-Trust Accounts

50-Lawyer-Owned Businesses

58-Real Estate Lawyers

A lawyer's ownership interest in a title insurance agency is not per se improper, but the lawyer must: follow all conflicts rules; completely separate the lawyer's law practice from any title insurance agency; and avoid any revelation of client confidences. The lawyer may not: be compensated by the title insurance agency based on the referrals of clients to the agency; receive a fixed salary unless it is related to the work performed for the agency; receive any interest earned on funds deposited in the agency's trust account; or arrange for the agency to pay for any law firm salaries, services or advertisements.It is per se improper for the lawyer to represent a party in a transaction if the lawyer "directly or indirectly performs the function of a Title Insurance Agent" for the transaction, or holds a license as a Title Insurance Agent. A lawyer may arrange for title insurance through the agency to one of the lawyer's clients only: with consent after full disclosure; and if the transaction is not "unconscionable, unfair or inequitable when made." The Bar indicates that "all doubts regarding the sufficiency of the disclosure must be resolved in favor of the client, and against the attorney." The disclosure should be in writing and accepted by the client in writing, and should include an explanation of the cost and the availability of alternatives. (Revised 2/15/95) [Under Rule 1.8(a), a lawyer may not enter into a "business transaction" with a client unless the client is given an opportunity to seek independent advice, and there has been full disclosure and consent in writing.]2/15/1995
0573

printPrint
40-Trust Accounts

60-Lawyers Acting as Trustees

A lawyer/trustee may invest funds in a bank that does not comply with the trust account requirements, but may not use such a bank if the lawyer has the right to withdraw funds from the trust account. 5/29/1984
0458

printPrint
40-Trust Accounts

A legal aid society may not withdraw from its trust account and use funds received from former clients for costs, even though the funds were not used and the clients cannot be located despite a diligent search. In the future, the legal aid society could ask that clients consent to such withdrawal and use of left-over client funds. 7/21/1982
1238

printPrint
40-Trust Accounts

A multi-state law firm must segregate funds received from Virginia clients in a separate account in a bank authorized to do business in Virginia (even if the bank is not physically located in Virginia). 5/18/1989
0383

printPrint
40-Trust Accounts

58-Real Estate Lawyers

A real estate buyer's lawyer may deliver the proceeds of a settlement to the seller before the deed is recorded, as long as the lawyer has taken appropriate steps to protect the client and the client consents. 7/29/1980
0663

printPrint
40-Trust Accounts

58-Real Estate Lawyers

A real estate closing lawyer may not disburse trust funds before the vesting of title and perfection of liens. 2/27/1985
1265

printPrint
40-Trust Accounts

A real estate developer's lawyer must deposit all trust money in a bank that meets the requirements of the ethics code, and may not use an investment management service that does not fulfill all of the Code's requirements. 8/14/1989
1417

printPrint
16-Lawyer's Personal Interests

40-Trust Accounts

58-Real Estate Lawyers

A real estate lawyer has no duty to place trust money in a bank that will insure the entire amount, but may deposit money in a bank for which the lawyer acts as a director, shareholder and counsel if the client consents after full disclosure. [Under Rule 1.8(a), a lawyer may not enter into a "business transaction" with a client unless the client is given an opportunity to seek independent advice, and there has been full disclosure and consent in writing.]5/14/1991
1246

printPrint
40-Trust Accounts

A retainer must be placed in a trust account and may be transferred to the lawyer's account only as the fees are earned, and money should remain in the trust account until any dispute is resolved by appropriate legal means. 6/1/1989
1636

printPrint
8-Bills and Fees

39-Miscellaneous

40-Trust Accounts

41-Non-Virginia Lawyers

A Virginia firm bills its clients for the firm's costs, as well as costs incurred by foreign law firms. The Virginia firm does not place the client reimbursement checks in its trust account, and sometimes reimburses the foreign law firms many months later.If the Virginia firm has already paid the foreign law firm for its costs, then the Virginia firm may place the client's reimbursement checks in its operating account. However, the reimbursement checks must be placed in the trust account if the foreign law firms have not yet been reimbursed. Likewise, the Virginia firm may not use the clients' reimbursement checks for other purposes, but instead has an ethical duty to immediately pay the foreign law firms. 4/19/1995
0724

printPrint
28-Law Firm Staff

40-Trust Accounts

A Virginia lawyer who practices in a District of Columbia office may maintain a trust account in a Virginia bank, and may arrange for a non-lawyer to handle the account as long as the lawyer supervises the non-lawyer and is ultimately responsible for the account. [Rule 1.15 required that a law firm office use a trust account bank in the same jurisdiction; Rule 8.5 determines which state's disciplinary rule would apply to violations.]9/24/1985
ABA-475

printPrint
38-Fee Splitting

40-Trust Accounts

ABA LEO 475 (12/7/16) (Because another lawyer who has entered into a fee-split arrangement with a lawyer is a "third person" under ABA Model Rule 1.15's trust account rules, the lawyer receiving a fee that will be split with the other lawyer must: notify the other lawyer of the fee's receipt; hold the money in a trust account until it is appropriate to disburse it; promptly "deliver" any earned fee to the other lawyer; provide a full accounting if the other lawyer asks for one; keep any disputed funds in the trust account until any dispute is resolved.)12/7/2016
1835

printPrint
40-Trust Accounts

Although banking law defines when funds are "cleared" (meaning that they are "available for withdrawal and disbursement with no chance of revocation or recall by the financial institution"), Rule 1.15 prohibits lawyers from disbursing on funds until they are cleared. This per se rule applies even if the trust account holds only one client's funds, or has somehow been "securitized."9/7/2006
0464

printPrint
3-Multiple Representations on the Same Matter

40-Trust Accounts

58-Real Estate Lawyers

As long as all clients consent, a lawyer may conduct a "dry closing." 9/20/1982
0748

printPrint
8-Bills and Fees

40-Trust Accounts

As long as the client consents, a lawyer may place the client's funds in an interest-bearing account and apply the interest to pay the lawyer's fees. 12/30/1985
1021

printPrint
40-Trust Accounts

Even if the bank handling a trust account has agreed to immediately credit deposited funds without waiting for clearance and honor all trust account check, a personal injury lawyer may not disburse funds from a trust account before the funds have cleared. 1/7/1988
0614

printPrint
40-Trust Accounts

Except as authorized by statute, a lawyer may not disburse funds from a trust account until the funds have cleared. A lawyer may not deposit a check endorsed by the client and the lawyer in the firm's trust account and write the client a check from the operating account for the amount the client is due (intending to reimburse the general account from the trust account once the check clears).10/30/1984
1848

printPrint
8-Bills and Fees

40-Trust Accounts

Having received an opinion from Virginia's Attorney General, the Bar approves Virginia lawyers passing along to their client the transactional costs/merchant fees charged by a credit card company when the client uses a credit card -- as long as the lawyer explains the process to the client before the client uses the credit card. Such transactional/service fees may be deducted from the lawyers' trust account, but lawyers using best practices should arrange for the fees to be deducted from the lawyers' operating account. Lawyers must "monitor and personally replace any escrow funds that are subject to a charge back" by a credit card company -- and lawyers using best practices should arrange for any charge backs to come from the lawyers' operating account rather than trust account.4/14/2009
ABA-427

printPrint
8-Bills and Fees

40-Trust Accounts

Lawyers acquiring security interests in client property to secure the payment of fees must comply with the rules governing business transactions with clients (although fee agreements themselves generally do not require such compliance). Lawyers executing on the security may only obtain a reasonable fee. Lawyers taking possession of property under such an arrangement must comply with trust account procedures. Lawyers may not retain collateral "exceeding the reasonable fee plus the reasonable costs of preserving and realizing on the security," despite any state law allowing the exercise of greater rights.5/31/2002
ABA-465

printPrint
13-Marketing - Miscellaneous

38-Fee Splitting

40-Trust Accounts

82-Advertising

Lawyers may engage in "daily deal" marketing, but must comply with all of their Model Rules obligations, "including avoiding false or misleading statements and conflicts of interest, providing competent and diligent representation, and appropriately handling all money received." Under a "coupon deal" arrangement, a lawyer sells a coupon entitling the purchaser to a certain number of hours of legal service at a discounted rate. The marketing organization handling the arrangement collects purchasers' payments and forwards them to the lawyer, retaining a contractually-agreed upon percentage of the payments. The purchaser later directly pays the lawyer at the discounted rate when the lawyer provides the services. Under a "prepaid deal" arrangement, the purchaser pays the marketing organization the entire legal fee, and then receives services that would normally have cost more than that payment. Despite some state bars conclusion that such daily deal marketing are per se unethical, the ABA Model Rules do not automatically prohibit such daily deals if lawyers follow the Rules. First, payments to the marketing organization do not constitute unethical fee splitting. Instead, they essential constitute "payment for advertising and processing services." However, "one caveat is that the percentage retained by the marketing organization must be reasonable." Second, lawyers may not advertise daily deals in a false or misleading fashion. For instance, lawyers must "define the scope of services offered," and "explain under what circumstances the purchase price of a deal may be refunded, to whom, and what amount." Third, lawyers must explain that until the lawyer and the daily deal purchaser engage in a "consultation," no client-lawyer relationship exists. Lawyers must further warn anyone trading for, or receiving as a gift, any daily deal rights must carefully review all the terms and conditions. Fourth, before entering into a client-lawyer relationship, lawyers must assure that they are competent to undertake the representation, and warn any prospective clients if their matters will require more of the lawyers' time than the prospective client purchased under the daily deal. Lawyers must also assure that they do not accept so many daily deal clients that they cannot competently and diligently represent them all. Fifth, lawyers must properly handle any payments they receive from the marketing organization. Under a coupon deal, payments collected by the marketing organization and sent to lawyers are not legal fees -- and must be deposited into lawyers' operating account. Under a prepaid deal, payments lawyers receive from the marketing organization constitute "advance legal fees," and must be deposited into the lawyers' trust account. Lawyers must explain to anyone purchasing a prepaid deal what amount of the payment "is not a legal fee and will be retained by the marketing organization." Although it may be difficult, lawyers must also coordinate with marketing organizations to obtain required information about the purchasers whose funds the lawyers deposit into their trust account. Sixth, lawyers must properly handle money they have received in connection with purchasers who never use the lawyer's services. If a coupon purchaser never uses the lawyer's services, the lawyer may retain such payments (despite some state bars' disagreement) -- if the lawyer has "explained as part of the offer that the cost of the coupon will not be refunded." If a prepaid deal purchaser never uses the lawyer's services, the lawyer "likely" must refund any unearned advanced fees -- unless the prepaid offer was "for a simple service at a modest charge," in which case "it is possible no refund would be required, provided proper and full disclosure of a no-refund policy had been made." Seventh, lawyers must properly handle money they receive from daily deal purchasers whom the lawyer cannot represent because of a conflict or other "ethical impediment." In such a situation, lawyers must provide a full refund to the purchaser under either a coupon or a prepaid deal -- and cannot avoid this duty by disclosing otherwise in marketing materials. Because the lawyer is unable to undertake the representation "through no fault of the purchaser," the lawyer must refund all the money the purchaser has paid -- even if the lawyer cannot recoup the money retained by the marketing organization.10/21/2013
1262

printPrint
40-Trust Accounts

Lawyers/limited partners may not leave their proceeds in a trust account because it would involve commingling the lawyers' money and clients' money. 8/3/1989
1263

printPrint
40-Trust Accounts

Lawyers/limited partners may not leave their proceeds in a trust account because it would involve commingling the lawyers' money and clients' money. 8/3/1989
0183

printPrint
40-Trust Accounts

58-Real Estate Lawyers

Rules governing disbursement of funds by a lawyer handling real estate closings.10/31/1980
1373

printPrint
40-Trust Accounts

58-Real Estate Lawyers

The Bar declines to resolve a legal dispute about a need to put real estate commissions in a trust account pending resolution of a dispute about the commission. 7/31/1990
1591

printPrint
14-Ownership of Files and Attorney Lien Issues

36-Withdrawal from Representations

40-Trust Accounts

The Code permits a lawyer to withdraw from representing a client and to exert a common law possessory lien on funds being held in trust for the client. 6/14/1994
0510

printPrint
8-Bills and Fees

40-Trust Accounts

The labels of payments as "retainers" or "guaranteed minimum fees" are not dispositive, and any payment for fees not yet rendered must be placed in a trust account and not removed until the services are rendered. 3/30/1983
1644

printPrint
39-Miscellaneous

40-Trust Accounts

58-Real Estate Lawyers

The LEO provides guidance to a real estate lawyer whose checks are not cashed: (1) the lawyer should follow the Uniform Disposition of Unclaimed Property Act (Va. Code § 55-210.1 et seq.); (2) a lawyer must "use whatever means are reasonable" to find people entitled to receive trust funds (this would "in almost all instances" include first class mail and -- "if the amount of money involved justified the cost" -- include checking with telephone information or postal records); (3) a lawyer may deduct from the funds held in trust reasonable costs incurred in attempting to locate the party, but may not deduct an attorney's fee; (4) the lawyer may not agree with the client in advance that the lawyer may keep unclaimed funds. 6/9/1995
ABA-463

printPrint
26-Fruits and Instrumentalities of Crimes

40-Trust Accounts

The Model Rules "do not mandate that a lawyer perform a 'gate-keeper' role" to "combat money laundering and terrorist financing." The ABA's August 2010 Voluntary Good Practices Guidance for Lawyers to Detect and Combat Money Laundering and Terrorist Financing takes the proper "risk-based approach" rather than a "rules-based" approach. Lawyers following those guidelines can comply with the Model Rules by avoiding improperly assisting money laundering or terrorist financing. Among other things, lawyers may terminate representations under Rule 1.16 if the lawyer "reasonably believes" clients are engaging in criminal or fraudulent conduct, even if the lawyer does not "know for certain" that clients are engaging in illegal conduct5/23/2013
0994

printPrint
40-Trust Accounts

The rule that allows a lawyer to take possession of trust account assets if a reasonable time has passed without any claims being made against the trust account is pre-empted by the statutory provision that would govern such a trust account that becomes part of a deceased lawyer's estate. 11/11/1987
0900

printPrint
40-Trust Accounts

58-Real Estate Lawyers

This LEO provides guidance under the Wet Settlement Act. 3/17/1987
0330

printPrint
40-Trust Accounts

44-Conflicts - Miscellaneous

Under A lawyer representing a mentally ill patient who receives an airline ticket due to shortly expire should redeem the ticket, place the money in a trust account and advise the court. [Rule 1.14 provides guidance to lawyers representing clients a disability.]7/30/1979
0988

printPrint
16-Lawyer's Personal Interests

29-Advancing Fees and Costs

40-Trust Accounts

Unless the client agrees or a court orders, lawyers may not pay themselves out of escrow funds that were set aside for out-of-pocket costs incurred in litigation. 10/29/1987
0262

printPrint
8-Bills and Fees

40-Trust Accounts

Unless the client consents, a lawyer may not use funds paid to the lawyer as agent for the client to satisfy an unpaid legal bill. 6/6/1975
1865

printPrint
40-Trust Accounts

Virginia's unique Comment 4 to Rule 1.15 describes a lawyers' duties in dealing with trust account funds to which a third party might claim some entitlement. In the case of such formal indicia of entitlement as "a statutory lien, a judgment lien and a court order or judgment," lawyers have the same duty to such third parties as they do to clients -- even though the lawyer is not a party to such agreement and has not signed any document. Lawyers need not determine if the client or such a third party is entitled to the trust account funds, but instead "should hold the disputed funds in trust for a reasonable period of time or interplead the funds into court." Lawyers should indicate in retainer letters that "medical liens will be protected and paid out of the settlement proceeds or recovery." Although in most situations lawyers' duties arise only if they have "actual knowledge" of a third party's lawful claim to trust account funds, "in some situations under federal or state law the lawyer need only be aware that the client received medical treatment from a particular provider or pursuant to a health care Plan." If a third party "has not taken the steps necessary in order to perfect its lien or claim" to trust account funds, and cannot point to a "contract, order or statute establishing entitlement to the funds," lawyers may safely distribute the trust account funds to the client -- but should warn the client of the risks the client faces in disregarding a third party's claim. Addressing three hypotheticals, concluding that: (1) a lawyer who knows that a client had medical bills paid by a health plan, but who has insufficient information to know whether a valid lien for that claim even exists, may not investigate the plan's claim against the settlement amount without the client's informed consent -- because the lawyer's inquiries might "remind or encourage the plan to perfect a lien."; the lawyer may thus disburse the settlement funds to the client without violating the ethics rules, but should warn the client in writing of the risk of the client then disbursing the funds; the lawyer and the client may "also suffer civil liability under federal law."; (2) a lawyer who receives a letter from a health plan asserting subrogation rights, and who has twice requested documentation from the plan supporting its claims without receiving a response, may safely disburse the trust account funds to the client, because the lawyers has "exercised reasonable diligence" to determine the plan's subrogation claims or a lien; (3) a lawyer representing a client who has settled a claim against a hospital, and who has received a health plan's response asserting subrogation rights and citing federal regulations, but who has not heard back from the plan after three emails and a voice mail message seeking more information about the plan's subrogation rights, may safely disburse funds to the client without violating any ethics rules. A third party's "mere assertion" of a claim to trust account funds does not entitle the third party to the funds. Lawyers must exercise "competence and reasonable diligence" to determine whether a "substantial basis exists for a claim asserted by a third party," but in the absence of such a basis and the absence of the third party's steps perfecting its entitlement to funds, a lawyer may disburse funds to the client after warning the client about "the consequences of disregarding the third party's claim." If a lawyer "reasonably believes" that a third party has an interest in trust account funds (or the client "has a non frivolous dispute" over a third party's entitlement to funds), the lawyer cannot disburse the funds -- but must hold them in trust until the dispute is resolved, or interplead the funds into court.11/16/2012

Copyright 2000, Thomas E. Spahn