Safekeeping Property · 2-8% of the exam
20.1.1No commingling: the cardinal rule (Rule 1.15(a)–(c))
On this page
- Rule 1.15(a)–(c) — Separation of client property
Why
A lawyer holding another person's money is a fiduciary. Mingling client funds with the lawyer's own creates risk of loss and prevents verification. A single instance can trigger suspension. Once the two pools touch, no one can prove afterward whose dollar was spent on what. The wall has to hold before any loss occurs, not after.
Plain English
Client or third-party funds go into a separate trust account the moment you receive them. Bank service charges are the sole purpose for which a lawyer may deposit firm funds into the client trust account, and then only in the amount necessary for that purpose; the records must show which part of the funds is the lawyer's.
The account sits in the state of the lawyer's office, or elsewhere with the consent of the client or third person. A pooled account is permissible provided each client's balance is tracked separately.
Rule
Rule 1.15(a)–(c) — Separation of client property
A lawyer shall hold property of clients and third persons separately from the lawyer's own property.
Client money received in connection with a representation must be deposited into a client trust fund account upon receipt.
- Rule 1.15(c)
A lawyer may not draw from the trust account until funds are earned and withdrawal is authorized.
- Rule 1.15(b) — exception (bank service charges only)
A lawyer may deposit personal or firm funds into trust solely to pay bank service charges, in the minimum amount necessary for that purpose. No other business reason justifies depositing firm funds into the trust account. Comment [2]: accurate records must be kept regarding which part of the funds are the lawyer's.
A pooled trust account is permissible provided each client's balance is accurately and separately tracked.
- Location
The account must be:
- in the state of the lawyer's office, or
- elsewhere with the consent of the client or third person whose funds are held.
Example 1
Ex. 1
Ana's operating account is overdrawn on Thursday when payroll is due. She transfers $4,000 from the client trust account to cover payroll, expecting a client wire by Friday afternoon. The wire clears on time; she replaces every dollar by Friday's close.
Ana violated Rule 1.15(a) at the moment of transfer. Her intent to restore the money, the brevity of the borrowing, and the fact that she replaced every dollar by week's end are all irrelevant. Commingling and misappropriation are complete at the moment of transfer. Clock Ana's violation at the transfer, not at the repayment.
Example 2
Ex. 2
Ben faces a $3,000 office-supply invoice due Friday before billing closes. He transfers $3,000 from trust, marks the transfer "temporary," and replaces the full amount Monday from incoming fees. No client balance ever falls below what he owes, and the books reconcile perfectly by Tuesday.
The violation is still complete. Every fact the exam offers as an excuse — "temporary," perfect repayment, no client shortfall — is irrelevant. Misappropriation is complete at the moment of transfer. Brief, harmless, fully remedied borrowing remains commingling. Delete the word "temporary" from Ben's transfer and nothing about the transfer changes.
Trap
Tip
Note — state practice, not Rule 1.15. Most states require nominal or short-term client funds to be pooled in an IOLTA account whose interest funds legal aid; that is state law, not Rule 1.15. The account-selection step comes first: funds that are nominal in amount or expected to be held only briefly go into the pooled IOLTA account, and funds large enough or held long enough to earn net interest for the client go into an interest-bearing account opened for that client alone. Interest on larger or long-held balances belongs to the client, and IOLTA programs have survived constitutional takings challenge (Brown v. Legal Foundation of Washington, 538 U.S. 216 (2003)) — state and case law, not the Rule.
Note — Comment [6], not the black letter. A lawyers' fund for client protection reimburses people who have lost money or property through a lawyer's dishonest conduct. Where such a fund has been established, a lawyer must participate where participation is mandatory, and should participate where it is voluntary.
Questions · 2
Q 01ch20-e01
Question 1 of 2 · Rule 1.15(a)
Attorney maintained a single pooled client trust account for a small litigation practice. The account held funds belonging to several clients, including a deposit Client had wired to cover an upcoming filing fee. On a Monday the firm's quarterly malpractice insurance premium came due, and the firm operating account was short by six thousand dollars. Attorney moved six thousand dollars out of the trust account into the operating account and paid the premium that afternoon. Four days later a fee payment arrived and Attorney returned the full six thousand dollars to the trust account. No client balance was ever reported as short, and the account records reconciled at the end of the month. Is Attorney subject to discipline?
Keys 1 to 4 choose.