Kelly Dillon, CFE
Office of Chief Disciplinary Counsel
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What you should know.
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The checks should be clearly printed to
indicate the account is a “trust account”.
If your bank will not deduct the cost of
ordering checks from your operating account,
you should be sure to include the cost of the
checks on your bank charge ledger and
reimburse the account accordingly.
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Looking for advice…
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Formal Opinion 128 (nonrefundable fees) –
Posted on May 19th, 2010
The Advisory Committee of the Supreme Court of Missouri has issued a
formal opinion concluding that attorneys may not enter into agreements
for nonrefundable fees and that all fees must be placed in the attorney's
trust account until not subject to refund…
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◦ The funds of others.
◦ All advance fee deposits
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◦ Personal funds
◦ Earned fees
◦ Big money generating big interest
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Earned fees.
Funds due clients and third parties.
Payments for which funds are held.
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Funds in which two or more people claim
interest.
Funds not considered “good funds” by the
bank.
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Keep your checkbooks in different locations.
Remove your earned fees promptly.
Reconcile your account monthly.
Supervise your staff.
Maintain your trust account records for 5
years.
Keep copies of deposited items.
Respond promptly to the OCDC.
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Don’t pay your personal or office expenses
from your trust account.
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Don’t make payments to yourself for earned
fees unless you know your records are
accurate.
Don’t hold your deposits.
Don’t authorize clients to make deposits or
withdrawals from your account.
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General ledgers.
Client and bank charge ledgers.
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TRUST LEDGER
Trust Acct.: Standard
Nancy White
[Client or person with interest in funds]
File No. DO-02-2008-0034
Date
Description of Transaction
Check #
Funds Paid
Funds
Rec’d
Running
Balance
2/18/08
Advance fee deposit
2/22/08
Filing fee
1999
100.00
9,900.00
3/3/08
Investigator
2001
960.00
8,940.00
3/7/08
Fee disbursement
2008
1,500.00
7,440.00
4/2/08
Investigator
2031
640.00
6,800.00
4/7/08
Fee disbursement
2040
1,500.00
5,300.00
5/7/08
Fee disbursement
2059
3,900.00
1,400.00
5/12/08
Court reporter (neighbor depo)
2062
800.00
600.00
5/15/08
Advance fee deposit
5/20/08
Court reporter (accountant depo)
6/2/08
Advance fee deposit
6/7/08
Fee disbursement
2084
750.00
8,750.00
6/30/08
Court reporter (Husband’s depo)
2096
2,000.00
6,750.00
7/7/08
Fee disbursement
2110
6,000.00
750.00
7/20/08
Advance fee deposit
8/7/08
Fee disbursement
2131
3,600.00
12,150.00
9/7/08
Fee disbursement
2155
5,720.00
6,430.00
9/18/08
Refund of unearned fees
2170
6,430.00
0
10,000.00
5,000.00
2072
1,100.00
10,000.00
5,600.00
4,500.00
5,000.00
15,000.00
9,500.00
15,750.00
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General ledgers.
Client and bank charge ledgers.
Billing records, settlement sheets, time
sheets, etc.
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Receipts and disbursement journals of
deposits and withdrawals that include the
date, source and description of each deposit,
and the date payee and purpose for each
disbursement.
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Ledger records for each account, including
the source of all funds deposited, for who the
funds are being held, amount of funds,
descriptions for withdrawals, and names of
persons or entities to whom funds are
disbursed.
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Compensation agreements with clients,
including documents such as fee agreements,
engagement letters or retainer agreements.
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Accountings to clients or third persons.
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Bills to clients.
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Records showing disbursements to clients.
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Physical or electronic checkbook registers,
bank statements, records of deposit, prenumbered canceled checks, and substitute
checks.
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Electronic transfer records that include name
of the person authorizing the transfer, date
of transfer, name of recipient, and
confirmation from financial institution
showing account number, date and time of
transfer.
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Reconciliations.
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Portions of the client file reasonably related
to the client trust account transactions.
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Records of credit card transactions,
consistent with law and data security
standards.
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General ledgers.
Client and bank charge ledgers.
Billing records, settlement sheets, time
sheets, etc.
And….
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Receipt & Disbursement
Journal
aka: General Ledger
Other Reasonably
Related Documentation
Pursuant to Rule 41.15(f) & Comment [19]
Client and Bank Charge
Ledgers
Reconciled Bank
Statement
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~David Bowie
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New organizational system:
◦ Rule 4-1.145 – definitions for safekeeping
property and IOLTA accounts;
◦ Rule 4-1.15 – provisions for the
safekeeping of property;
◦ Rule 4-1.155 – provisions for maintaining
IOLTA accounts; and
◦ Rule 4-1.22 – provisions for file retention.
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(a)(3) [NEW] – Only a lawyer admitted to practice
law in MO or under the direct supervision of the
lawyer shall be authorized as a signatory or
authorize transfers from client trust account.
(See Comment [2] – “lawyer has a non-delegable
duty to protect & preserve the funds in a client
trust account and can be disciplined for failure to
supervise subordinates who misappropriate
client funds.” - See also Rule 4-5.3)
(a)(4) [NEW] Receipts shall be deposited intact
and records of deposits shall be sufficiently
detailed to identify each item. (See Comment [4]
– No split deposits)
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(a)(5) [NEW] Withdrawals shall be made only
by check payable to named payee, not to
cash, or by authorized electronic transfer.
(a)(6) [NEW] Must wait a reasonable period of
time for funds to actually be collected by the
financial institution where the trust account is
held, and cannot make a disbursement if the
lawyer has a reasonable belief that the funds
have not yet been collected by the financial
institution. (See Comment [5])
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(a)(7) [NEW] Reconciliation of the account
shall be performed in a reasonably prompt
time each time an official statement from the
financial institution is provided or available.
(b) Lawyer may only deposit his or her own
funds in a client trust account for the purpose
of paying bank service charges, and only in
the amount necessary for that purpose. (See
Comment 2)
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(a)(3) – Cannot delegate supervision;
 (a)(4) – No split deposits;
 (a)(5) – Withdrawals by check or
electronically to named payee, not to
Cash;
 (a)(6) – Need to make sure “good
funds”
 (a)(7) – Regular reconciliations.
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 Protection
of the Public
 Attorney Education
◦ Suggest review of the Trust Account
Handbook.
◦ Recommend or require CLE attendance.
◦ Make suggestions for better accounting
practices.
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 Number
of overdraft
cases opened in 2010?
 2011?
 2012?
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Bank error
Accounting error
Failed to reconcile
Premature disbursement
Comingling or misuse
Misappropriation by Attorney
◦ Other
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Missouri Lawyer Trust Account Foundation
◦ Bank fees, rates, etc.
◦ 573-634-8117
◦ www.MOiolta.org
Missouri Legal Ethics Counsel
◦ Melinda Bentley
◦ 573-638-2263
◦ www.MO-Legal-Ethics.org
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