What must a lawyer do with client trust-account funds, such as filing-fee refunds, when the client cannot be located?

Plain-English summary

A firm held client trust funds (filing fees paid by clients and refunds of those fees from courts) owed to clients who had moved and could not be found despite calls, directory assistance, and contacts with friends, relatives, and neighbors. The question was what to do with the funds.

The opinion applies Rule 1.15, which requires a lawyer to keep client and third-person property separate, to maintain complete records for seven years after the representation ends, to promptly notify and deliver funds to those entitled, and to render a full accounting on request. The Committee stated that trust funds are held in a fiduciary capacity and never become the lawyer's property, so as a matter of ethics the lawyer must hold the funds indefinitely and make all reasonable efforts to locate the client.

As a matter of law, the opinion explains, a different mechanism applies through the Mississippi Uniform Disposition of Unclaimed Property Act (Miss. Code Ann. section 89-12-1 et seq.). Under section 89-12-13, money held in a fiduciary capacity is presumed abandoned unless the owner has, within seven years, accepted payment, corresponded about it, or otherwise shown interest reflected in the fiduciary's records. A holder of property presumed abandoned must report to the State Treasurer and deliver the money under the statute, after which the State assumes custody and the good-faith holder is relieved of liability. The opinion concludes the lawyer must exercise reasonable care to keep accurate client addresses and pay funds over promptly, but where a client cannot be located, must hold the funds and continue reasonable location efforts until they are presumed abandoned, at which point the Act's procedures govern.

In practice

Under this opinion, unclaimed client trust funds remain the client's property held in a fiduciary capacity, so the lawyer cannot keep them. The ethical duty under Rule 1.15 is to hold and account for the funds and keep trying to locate the client. The opinion identifies the Mississippi Uniform Disposition of Unclaimed Property Act as the legal mechanism that governs once the funds are presumed abandoned (after the statutory period), directing the lawyer to report to and deliver the funds to the State Treasurer as the Act prescribes.

Common questions

Q: Can a lawyer keep trust funds owed to a client who has disappeared?

A: No. The opinion concludes the funds are held in a fiduciary capacity and never become the lawyer's property; the lawyer must hold and account for them and keep trying to locate the client.

Q: What happens to the funds if the client is never found?

A: The opinion concludes that once the funds are presumed abandoned under the Mississippi Uniform Disposition of Unclaimed Property Act, the lawyer follows the Act, reporting and delivering the funds to the State Treasurer.

Q: How long must the lawyer hold the funds before they are presumed abandoned?

A: The opinion describes the Act's seven-year period, after which money held in a fiduciary capacity is presumed abandoned absent the owner's payment, correspondence, or other shown interest.

Background and rules framework

The opinion applies Mississippi Rule of Professional Conduct 1.15 (safekeeping property, the analog of Model Rule 1.15), quoting Rule 1.15(a) and (b) on segregation, recordkeeping, notice, delivery, and accounting. It then sets the ethical duty against the statutory framework of the Mississippi Uniform Disposition of Unclaimed Property Act for property presumed abandoned.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.15 / Mississippi Rule 1.15: safekeeping client and third-person property, including segregation, seven-year recordkeeping, prompt notice and delivery, and accounting on request.

Statutes:

• Mississippi Uniform Disposition of Unclaimed Property Act, Miss. Code Ann. section 89-12-1 et seq., including sections 89-12-13 (presumption of abandonment), 89-12-17, 89-12-23 (report to the State Treasurer), 89-12-29 (delivery), and 89-12-31 (State custody and holder's release from liability).

See also

• MS Bar Ethics Op. 178: Disposition of Unclaimed Trust-Account Funds
• MS Bar Ethics Op. 243: Safekeeping and Disposition of Unclaimed Funds
• MS Bar Ethics Op. 184: Paying a Third Party From Settlement Only When Entitled

Source

• Landing page: https://www.msbar.org/ethics-discipline/ethics-opinions/formal-opinions/104/
• Original PDF: https://www.msbar.org/media/1019/et_op_104-amended.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

ETHICS OPINION NO. 104

OF THE MISSISSIPPI BAR

RENDERED June 06, 1985

AMENDED April 06, 2013

TRUST ACCOUNTS: A lawyer holding property or monies belonging to clients with whom he has lost contact must retain and account for said funds, subject to the Mississippi Uniform Disposition of Unclaimed Property Act.

The Ethics Committee of The Mississippi Bar has been asked to render an opinion on the following fact situation:

Currently we have on deposit in our client trust funds, monies belonging to clients with whom we have lost contact. The funds consist of filing fees paid by clients and refunds of such fees received from the courts. The clients to whom the above funds are owed have moved from the addresses which we have for them in our files. Efforts to locate them by calling telephone numbers, through directory assistance, and through contacts with friends, relatives and neighbors have failed.

Rule 1.15 of the Mississippi Rules of Professional Conduct (MRPC) provides as follows:

(a) A lawyer shall hold property of clients or third persons that is in a lawyer's possession in connection with a representation separate from the lawyer's own property. Funds shall be kept in a separate account maintained in the state where the lawyer's office is situated, or elsewhere with the consent of the client or third person. Other property shall be identified as such and appropriately safeguarded. Complete records of such account funds and other property shall be kept by the lawyer and shall be preserved for a period of seven years after termination of the representation.

(b) Upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person. Except as stated in this Rule or otherwise permitted by law or by agreement with the client, a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive and, upon request by the client or third person, shall promptly render a full accounting regarding such property.

It is too obvious to require explanation that client trust funds and other property held by a lawyer are held by him in a fiduciary capacity. They never become the property of the lawyer. In the present fact situation, the lawyer has lost contact with his client and finds himself unable to return the funds, although he desires to do so. As a matter of ethics, the lawyer is under an obligation to hold the client's funds indefinitely and to make all reasonable efforts to locate the client in order to return the funds or property. As a matter of law, however, a different mechanism is imposed by the provisions of the Mississippi Uniform Disposition of Unclaimed Property Act, Miss. Code Ann. § 89-12-1 et seq. Section 89-12-13 provides that any money held in a fiduciary capacity for the benefit of another person is presumed abandoned unless the owner has, within seven years after it became payable or distributable, accepted payment, corresponded in writing concerning the property, or otherwise indicated an interest in the property as evidenced by a memorandum or other record on file with the fiduciary. Additional conditions are imposed by Miss. Code Ann. § 89-12-17, which are not necessary for this opinion. Every person holding funds or other intangible personal property presumed abandoned under the provisions of the Act is required to report to the State Treasurer on a form prescribed by him, Miss. Code Ann. §89-12-23, and thereafter to deliver the money to the State Treasurer in accordance with the procedures of the statute, Miss. Code Ann. §89-12-29. Upon the payment or delivery of abandoned property to the Treasurer, the State of Mississippi assumes custody and is responsible for the safekeeping thereof. The person who pays or delivers abandoned property to the Treasurer in good faith is relieved of all liability for any claim which then exists or which thereafter may arise or be made in respect to the money or property paid or delivered. Miss. Code Ann. 89-12-31.

It is the conclusion of the Ethics Committee that a lawyer holding funds in his trust account is required to exercise reasonable care to maintain accurate addresses of the clients to whom such funds are owed and to pay those funds over to the client as soon as possible, in order to avoid situations as this from occurring. Nonetheless, if it is impossible to locate a former client to whom client funds are due, they must be held by the lawyer, who shall continue to make reasonable efforts to locate the client and deliver the funds to him until presumed abandoned under the Mississippi act, at which time the procedures of the act govern the disposition of the funds or other property.