Can a lawyer skip the trust account for a small recording fee by depositing the client's single check for the fee and recording cost into the general account?

Plain-English summary

Attorney A was hired to draft a deed for Client B, preside over its execution, and see it recorded. B would pay a relatively small legal fee plus the recording cost at execution. For cost and convenience, A wanted to take a single check for the fee and recording cost, deposit it in his general office account, and write one check to the Register of Deeds for recording. The inquiry asked whether that procedure violated the Rules, and if so whether there was a responsible way to handle the transaction without an intermediate trust deposit and multiple checks.

The opinion concluded that Rules 10.1(a) and (c) require a lawyer to deposit into trust all funds received as a fiduciary, and that this obligation is not diminished because the sum is small; strict segregation of client funds from the lawyer's own is always necessary to avoid confusion and to keep trust funds beyond the reach of the lawyer's creditors or estate. But it noted that Rule 10.1(c) provides that funds received from the client as reimbursement for expenses the lawyer has properly advanced need not be deposited in trust. So a lawyer could advance the recording cost from his general account, then accept from the client a single check for the legal fee and the advanced expense, and deposit that check directly and finally into the general office account.

Currency note

This opinion was issued in 1988, before the North Carolina State Bar's adoption of the 2003 revisions to the Rules of Professional Conduct. The provisions it applies (Rules 10.1(a) and (c), trust accounting) have since been renumbered and revised (the corresponding Model Rule is 1.15). 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 Treat this page as historical context, not current guidance.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: Do small client funds have to go into the trust account?

A: Yes. The opinion concluded that funds received as a fiduciary must be deposited in trust no matter how small the sum.

Q: Was there a way to avoid the intermediate trust deposit?

A: Yes. The opinion concluded the lawyer could advance the recording cost from the general account, then take one check for the fee plus the advanced expense.

Q: Why is reimbursement of an advanced expense treated differently?

A: The opinion concluded that Rule 10.1(c) lets reimbursement for expenses the lawyer properly advanced be deposited directly into the general account rather than trust.

Background and rules framework

The opinion applied North Carolina Rules 10.1(a) and (c), the trust-accounting provisions (corresponding to Model Rule 1.15). The analysis turned on Rule 10.1(c)'s reimbursement exception: by advancing the recording cost itself, the lawyer converts the client's payment into reimbursement of an advanced expense plus an earned fee, neither of which is entrusted client money.

Citations and references

Rules of Professional Conduct:

• North Carolina Rules 10.1(a) and (c) (trust accounting; reimbursement of advanced expenses)
• MR 1.15 (safekeeping property)

See also

• NC Ethics Op. RPC 51: trust accounting for litigation costs
• NC Ethics Op. RPC 50: nonrefundable retainers

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/rpc-47/

Original opinion text

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

Inquiry:

Attorney A is employed to draft a deed for Client B who wishes to give a parcel of real property to a relative. It is contemplated that Attorney A will, in addition to drawing the deed, preside over its execution and see that it is properly recorded. Client B is expected to pay a relatively small legal fee along with the cost of recordation at the time the deed is executed. For reasons of cost and convenience, Attorney A would like to ask his client for a single check representing the fee and the cost of recordation and would prefer to deposit that check in his general office account. From that account a single check would be written to the Register of Deeds for the cost of recordation.

Would the procedure described above violate the Rules of Professional Conduct? If so, is there any professionally responsible way of handling such transactions which would not involve an intermediate deposit in the trust account and the necessity of writing multiple checks?

Opinion:

Rules 10.1(a) and (c) quite clearly require a lawyer to deposit into his or her trust account all funds received as a fiduciary. This obligation is not in any way diminished when the sum involved is small. Strict segregation of client funds from the personal funds of the lawyer is always necessary to preclude confusion as to the identity of the funds and to ensure that trust funds are not subject to the claims of the lawyer's creditors or to those of his or her estate.

It should be noted that Rule 10.1(c) further provides that funds received from the client by the lawyer as reimbursement for expenses properly advanced by the lawyer on behalf of the client need not be deposited in the lawyer's trust account. A lawyer handling such transactions could therefore advance funds from his or her general account to pay the cost of recordation and could accept from the client a single check for the legal fee and the advanced expenses and the check could then be deposited directly and finally into the lawyer's general office account.