What can a lawyer do with leftover client trust funds when the owners cannot be found?

Plain-English summary

A lawyer who had taken judicial office in 1985 still held a dormant trust account with a balance of about $1,224, left over from years of practice. The lawyer could not reconstruct which clients, if any, the funds belonged to, and believed the balance was probably undisbursed attorney's fees and expenses. After advertising for claimants in a local newspaper for three consecutive weeks and receiving no inquiries over several years, the lawyer asked whether he could close the account and transfer the funds to a personal account.

The Commission answered that, having made a good-faith effort and exercised reasonable care to notify former clients of the funds, having established a mechanism for their retrieval, and having allowed sufficient time to pass, the lawyer may place the funds in a personal account. The opinion drew on a prior Commission determination (published in The Alabama Lawyer, January 1989) addressing a similar situation, which held that where funds cannot be attributed to a particular client, a reasonable and good-faith effort has been made to determine ownership, and the funds have been held long enough to assure that no unidentified client could successfully claim them within any applicable limitations period, the funds could be distributed. That prior determination distinguished a second category of funds that can be attributed to a client whose location is unknown: after a good-faith effort to locate the client, such funds must be held until presumed abandoned under state law and then turned over to the state.

Currency note

This opinion was issued in 1990, under the former Alabama Code of Professional Responsibility and before the Alabama State Bar's January 1, 1991 adoption of the Rules of Professional Conduct and the 2002 Ethics 2000 revisions to the ABA Model Rules. A lawyer's duty to safeguard client funds is now in Rule 1.15, and unclaimed-property questions are governed by current state abandoned-property law. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer keep unclaimed trust-account money that seems to be unpaid fees?

A: Per the opinion, yes, where the funds cannot be attributed to any particular client, the lawyer has made a reasonable, good-faith effort to find owners, and enough time has passed that no unidentified client could still claim them.

Q: What effort did the opinion treat as sufficient before closing the account?

A: The opinion credited advertising for claimants, notifying former clients of the funds, establishing a mechanism to retrieve them, and allowing sufficient time to pass with no claims.

Q: What about trust funds tied to a known client who cannot be located?

A: The opinion's underlying authority treated those differently: after a good-faith effort to locate the client, such funds must be held until presumed abandoned under state law and then turned over to the state.

Background and rules framework

The opinion addresses a lawyer's stewardship of client trust funds, the duty now reflected in Rule 1.15 (Model Rule 1.15, safekeeping property), in the setting of a dormant account whose owners cannot be identified. It relies on a prior Commission determination published in The Alabama Lawyer rather than on a numbered rule, and it ties the disposition of attributable-but-unclaimed funds to state abandoned-property (escheat) law.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.15 / Ala. R. Prof. C. 1.15 (safekeeping client property; trust accounts)

Other opinions cited:

• Prior Alabama Disciplinary Commission opinion published in The Alabama Lawyer, January 1989, p. 49 (disposition of unidentified trust funds)

See also

• RI EAP Op. 2004-07: When a Former Client Refuses to Accept Funds, Rule 1.15 Requires Maintaining the Trust Account
• RI EAP Op. 2011-04: Firm Must Hold Disputed Funds in a Dormant Real Estate Escrow Account in IOLTA Until Ownership Is Resolved

Source

• Landing page: https://www.alabar.org/office-of-general-counsel/formal-opinions/1990-08/
• Original PDF: https://www.alabar.org/assets/2019/02/1990-08.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

ETHICS OPINION

RO-90-08

Unclaimed client trust funds-lawyer's obligation to ascertain true owner, escheatment of unclaimed funds which appear to be lawyer's fees to lawyer

SUMMARY OF THE QUESTION:

I practiced law from 1971 through 1985 and maintained a trust account at a local bank. I assumed a judicial office in 1985 and had a balance remaining in my trust account of $1,200.00. I continued to receive statements on that account. The account is now dormant. I have some 1,500 files accumulated which are now boxed and stored in my home. My old office has been leased to another attorney who had access to these files and handled inquiries from former clients. That arrangement ceased in October of 1987 and during the period from 1985 to 1987 no inquiries were received relating to any trust funds by that lawyer or by me. The amount accumulated in my account is somewhat confusing because I normally operated a zero balance accounting method disbursing funds from the account upon receipt. I have had several secretaries to work for me over the years and each kept books differently but I cannot reconstruct the various events of many years of practice. I cannot find where the balance came from other than the fact that these are probably attorney's fees and expenses paid into the account but not disbursed to me. I feel that I have made a good faith effort to locate the claimants to these funds including advertising in a local newspaper for three consecutive weeks. No claims or inquiries have been received and I would now like to close out this account and transfer these funds into my personal account. Please advise as to whether I may do so.

ADDITIONAL INFORMATION:

Attached to the request is a letter from the attorney that leased the former law office stating that there had been no inquiries as to funds held in the escrow account and also attached is a copy of the trust bank account showing a balance of $1,224.10 as of December 30, 1989, and a copy of a legal notice published in the local newspaper for three consecutive weeks in November of 1988.

ANSWER:

In addressing a similar situation, the Disciplinary Commission opined that where funds cannot be attributed to a particular client, and where a reasonable and good faith effort has been made to determine the ownership of the funds, and where the funds have been held as long as necessary to assure that no unidentified client could make a successful claim against the account, an attorney might distribute those funds to the attorney's estate. (The Alabama Lawyer, January 1989, p. 49). The Commission quoted with favor ethics opinions from several different states holding that after reasonable and good faith attempts to ascertain ownership of the funds and after holding the funds long enough to make sure that no unidentified client could make a claim against the funds within any applicable statute of limitations, the funds could be distributed to the attorney's personal account or, in the case considered by the Commission, to his estate.

Accordingly, having made a good faith effort and having exercised reasonable care to notify the former clients of the existence of the funds and having established a mechanism for the retrieval of the funds and having allowed sufficient time to expire, the Commission is of the opinion that you may now place these funds in your personal account.

DISCUSSION:

Attached hereto is a copy of an article from The Alabama Lawyer, January 1989, in lieu of further discussion.

QUESTION:

A solo practitioner with an active trust account died. Attorney A was appointed executor and undertook to wind up the practice and distribute the funds from the trust account. The solo practitioner maintained an accounts ledger of the trust account, but the balances did not reconcile with the bank account. After several years A was able to determine the clients who owned the various accounts, and appropriate disbursements were made. He was unable, however, to determine the owners of some of the funds or the whereabouts of certain clients. What distribution should A make in order to close the account?

ANSWER:

There are two categories of funds in the account. The first category involved those funds that cannot be attributed to a particular client. After a reasonable and good faith effort is made to determine the ownership of the funds, and after holding the funds as long as necessary to assure that no unidentified client could make a successful claim against the account, A may distribute the funds to the solo practitioner's estate. The second category of funds in the account are those that can be attributed to a client but the location of that client is unknown. After making a good faith and reasonable effort to locate the client, A must hold the funds until they are presumed abandoned under state law, at which time he should turn them over to the state.

DISCUSSION:

Attorney A first should make every reasonable effort to ascertain the identity and location of the clients entitled to the funds. This would include publication of a notice in a newspaper of general circulation, not only in the area where the decedent practiced but also in the last known area where

AWJ/vt

3/12/90