Under former California Rule 4-100, how much of an attorney's personal funds may be kept in a common client trust account to cover bank charges, and may an attorney keep personal funds in the trust account as a buffer against overdrafts?
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This page answers the general question as of 1992. Ezel answers yours: whether it's allowed on your facts, under the current California Rules of Professional Conduct, with citations.
Currency note
This opinion was issued in 1992, before California's November 1, 2018 adoption of the renumbered Rules of Professional Conduct. Former Rule 4-100 corresponds to current Rule 1.15. The State Bar's Trust Account Record Keeping Standards and the IOLTA framework have been updated since. 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 Treat this page as historical context, not current guidance.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.
Plain-English summary
The committee considered a sole practitioner who kept approximately $500 of personal funds in a common client trust account, both to cover bank charges (check printing, deposit-of-insufficient-funds charges) and as protection against inadvertent "use" of client funds resulting from bank accounting errors.
The committee identified the general prohibition on depositing or maintaining attorney funds in a client trust account (Rule 4-100), and the exception in Rule 4-100(A)(1) for personal "funds reasonably sufficient to pay bank charges." Citing In the Matter of Respondent F, the committee identified the State Bar Court's holding that $121.83 maintained for five months was reasonable, "particularly because [the attorney] was planning to order new checks which cost $50 to $60." Citing the State Bar's 1992 Handbook on Client Trust Accounting, the committee identified that the specific amount permissible depends on the bank charges expected and how often they will be incurred.
The committee distinguished bank charges attributable to general account overhead (check printing, monthly service charges) from charges attributable to a specific client (wire transfer charges; bounced-check charges for a client's check). The committee identified that an attorney must record bank charges in: (1) the written ledgers for each client whose funds are in the common account; (2) a written ledger for common bank charges; and (3) the written journal for the common client trust account (Rule 4-100(C); Trust Account Record Keeping Standards adopted July 11, 1992).
The committee concluded that the amount of personal funds maintained should correspond to the bank charges incurred for general operations between each reconciliation. The attorney should modify the personal-fund balance to match the actual charges.
On the overdraft-buffer practice, the committee identified that California Supreme Court precedent repeatedly holds the maintenance of a personal-fund "buffer" against overdrafts to be impermissible commingling (Jackson v. State Bar; Silver v. State Bar). The committee concluded that the attorney should not keep personal funds in client trust accounts to guard against bank error or other overdrafts; instead, the attorney should review overdraft notices and statements scrupulously and refrain from writing checks against a recently deposited amount until that deposit clears.
The committee identified, in a footnote, that for an individual client trust account, there is no reason to keep personal or firm funds because charges should relate only to the client's services and should be offset by interest. If monthly charges routinely exceed interest, the client funds should be moved to a common account where the monthly service charge is paid by the State Bar.
Common questions
Q: How much personal money may a California lawyer keep in a common client trust account?
A: Per the opinion, only an amount "reasonably sufficient to pay bank charges" (Rule 4-100(A)(1)), tied to the bank charges incurred for the general operation of the account between reconciliations.
Q: Can the lawyer keep personal funds in the account as a buffer against bank or attorney error causing overdrafts?
A: Per the opinion, no. The committee identified the California Supreme Court (Jackson; Silver) as holding that personal-fund buffers against overdrafts constitute impermissible commingling.
Q: Which bank charges may be paid from personal funds in the common trust account?
A: Per the opinion, charges for general overhead (check printing, general monthly service charges). The committee identified client-specific charges (wire transfers, bounced-check charges on a client's check) as properly debited against the affected client's funds.
Q: What records must the lawyer keep?
A: Per the opinion, written ledgers for each client whose funds are in the common account, a written ledger for common bank charges, and the written journal for the common trust account, with reconciliation per the Trust Account Record Keeping Standards.
Q: Should an individual client trust account hold personal funds for bank charges?
A: Per the opinion (footnote), no, because charges to such an account should be offset by interest. If charges routinely exceed interest, the client's funds should be moved to a common account where the State Bar pays the service charge.
Background and rules framework
The opinion interprets former California Rule of Professional Conduct 4-100 (handling of client funds), particularly subdivisions (A) (general prohibition on commingling, with two exceptions including (A)(1) for bank-charge funds) and (C) (record-keeping). The Trust Account Record Keeping Standards adopted by the Board of Governors on July 11, 1992, and the State Bar's Handbook on Client Trust Accounting are referenced.
Citations and references
Rules of Professional Conduct (former):
- California Rule 4-100 (handling of client funds)
Cases:
- In the Matter of Respondent F, 2 Cal. State Bar Ct. Rptr. 17 (Rev. Dept. 1992), $121.83 maintained for five months reasonable
- Jackson v. State Bar, 25 Cal.3d 398 (Cal. 1979), buffer against overdrafts is commingling
- Silver v. State Bar, 13 Cal.3d 134 (Cal. 1974), personal-funds buffer impermissible
Other:
- Trust Account Record Keeping Standards (Board of Governors, July 11, 1992)
- State Bar of California, Handbook on Client Trust Accounting for California Attorneys (1992)
See also
- LACBA Opinion 484: Commingling and Security-Deposit Retainers
- LACBA Opinion 478: Medical Liens and Disbursement of Client Funds
Source
- Landing page: https://lacba.org/?pg=ethics-opinions
- Original PDF: https://lacba.org/docDownload/2010935
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