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...

USCIS Issues Clarifying Guidance on NAFTA TN Status Eligibility for Economists

U.S. Citizenship and Immigration Services (USCIS) announced today that it is clarifying policy guidance (PDF, 71 KB) on the specific work activities its officers should consider when determining whether an individual qualifies for TN nonimmigrant status as an economist.

The North American Free Trade Agreement (NAFTA) TN nonimmigrant status allows qualified Canadian and Mexican citizens to temporarily enter the U.S. to engage in specific professional activities, including the occupation of economist. The agreement, however, does not define the term economist, resulting in inconsistent decisions on whether certain analysts and financial professionals qualify for TN status as economists.

TN nonimmigrant status is intended to allow a limited number of professionals and specialists to work temporarily in certain specifically identified occupations in the United States. This updated guidance provides USCIS officers with a specific definition of one such category – economists – allowing them to adjudicate applications in a way that complies with the intent of the agreement. This policy update clarifies that professional economists requesting TN status must engage primarily in activities consistent with the profession of an economist. Individuals who work primarily in other occupations related to the field of economics — such as financial analysts, marketing analysts, and market research analysts — are not eligible for classification as a TN economist.

Business News

Clayton, MO Federal Criminal Defense Attorney The Law Offices of John M. Lynch, LLC, provides strong representation for clients with federal criminal defense. >> read
DuPage IL worker's comp lawyers The law firm of Krol, Bongiorno & Given, Ltd. has been a leader in the field of workers’ compensation law in DuPage, Illinois. >> read