Improper Handling of Client Trust Accounts

Ethics

Managing money is always tricky, especially when it belongs to someone elseThat's why, in 2006 alone, more than 20 lawyers found themselves before the State of Michigan Attorney Discipline Board after having grievances filed against them for mismanagement of their clients' funds.

However, in Michigan, there is an infrastructure in place that allows attorneys to insulate themselves from the consequences of accounting errors - both accidental and otherwise.

Specifically, Michigan Rule of Professional Conduct (MRPC) 1.15 provides guidelines for the two types of client accounts: Interest on Lawyers Trust Accounts (IOLTAs) and non-IOLTAs.

The rule defines an IOLTA as "an interest or dividend bearing account" that "shall include only client or third person funds that cannot earn income for the client or third person in excess of the costs incurred to secure such income while the funds are held."

Though interest is earned on this type of account, the client does not receive those proceeds. Instead, the interest is paid to the Michigan Bar Foundation.

Conversely, a non-IOLTA under MRPC 1.15 also earns interests or dividends, however, that "net interest or dividend will be paid to the client."

MRPC 1.15 applies to both pooled and individual client trust accounts. But, because "it is common for a lawyer only to maintain one pooled client trust account," said Professor Lawrence A. Dubin - who teaches Professional Responsibility at the University of Detroit School of Law - IOLTAs, rather
than non-IOLTAs, may be easier for attorneys to work with.

However, that doesn't mean that IOLTA administration is without its own pitfalls.

In fact, with penalties ranging from a slap on the wrist to a permanent loss of license, learning the ins and outs of proper client trust management is fast becoming an integral part of effective practice management.

Related listings

  • Lawyer to be Suspended Over Conduct

    Lawyer to be Suspended Over Conduct

    Ethics 04/03/2008

    The former head of the Wayne County, MI  Prosecutor Office's drug unit will be suspended with pay Friday and now faces an investigation that could lead to criminal charges for her actions in a 2005 cocaine case.Prosecutor Kym Worthy, in a prepar...

  • DOJ Presses Bribery Case

    DOJ Presses Bribery Case

    Ethics 04/02/2008

    A US Department of Justice spokesman said Monday that the department would continue to press its bribery case against Rep. William Jefferson (D-LA) despite the US Supreme Court's refusal to review an appeals court ruling that held the FBI's conduct d...

  • New Hampshire Adopts Rule for Clients Who Email

    New Hampshire Adopts Rule for Clients Who Email

    Ethics 03/28/2008

    New Hampshire adopted a rule that clearly protects persons who, in good faith, e-mail confidential information to a lawyer from having the lawyer use the information against the prospective client.  The comments to New Hampshshire Rule 1.18 prov...

New York Commercial Litigation Law Firm - Woods Lonergan PLLC

Founded in 1993 by Managing Partner James F. Woods, Woods Lonergan PLLC has built a strong reputation as a resourceful and industrious firm that provides clients with clear, concise, and straightforward answers to their most challenging legal issues. Partner Lawrence R. Lonergan, who joined the firm in 2008, has been a friend and colleague to Mr. Woods for over 40 years and shares the same business philosophy. Woods Lonergan PLLC’s collective experience and expertise enables the firm to expeditiously and effectively analyze the increasing challenges clients face in an evolving business and legal world, in many instances, avoiding unnecessary time and expense to our clients. Our mission is simple: provide cutting-edge expertise and sound advice in select areas of the law for corporate and business clients. We thrive on providing each client with personalized attention, forceful representation, and a collaborative team effort that embraces collective knowledge.

Business News

New York Adoption and Family Law Attorneys Our attorneys have represented adoptive parents, birth parents, and adoption agencies. >> read