Can an attorney holding real estate closing funds park them in a money-market or government securities fund like a Merrill Lynch Government Fund?

Plain-English summary

An attorney asked whether funds held temporarily pending the closing of a real estate deal could be placed in a U.S. Government securities fund. The Committee answered no.

It explained that the trust-account rule and R. 1:21-6(a) make clear that such funds may be invested only in New Jersey financial institutions, which are defined as banks, savings and loan associations, credit unions, and savings banks. The Merrill Lynch Government Fund and other similar funds do not qualify, so an attorney may not deposit money for real estate closings in such funds.

Currency note

This opinion was issued in 1985, before New Jersey's adoption of the 2004 revisions to the Rules of Professional Conduct and the later development of New Jersey's trust-accounting and IOLTA framework. 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 Treat this page as historical context, not current guidance.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: May an attorney hold real estate closing funds in a money-market or government securities fund?

A: No. The opinion held that such funds may be invested only in a New Jersey financial institution, and a government securities fund does not qualify.

Q: What counts as a qualifying institution?

A: Per the opinion, banks, savings and loan associations, credit unions, and savings banks.

Background and rules framework

The opinion applies the attorney trust-account safekeeping rule, RPC 1.15(a), together with R. 1:21-6(a), which require client funds to be held in a New Jersey financial institution. The opinion reads those provisions as limiting the permissible repositories for closing funds to the enumerated categories of New Jersey institutions.

Citations and references

Rules of Professional Conduct:

• MR 1.15 / NJ RPC 1.15(a) (safekeeping property; funds held in a New Jersey financial institution)

Court rules:

• R. 1:21-6(a) (attorney trust and business accounts; New Jersey financial institutions)

See also

• NJ ACPE Op. 582: Interest on Funds in the Attorney Trust Account
• NJ ACPE Op. 598: Deposit of Withheld Employment Taxes in the Trust Account
• NJ ACPE Op. 659: Collection Attorney and Waiver of Trust Account Interest

Source

• Full text (Justia mirror): https://law.justia.com/cases/new-jersey/advisory-committee-on-professional-ethics/2004/acp574-1.html
• Issuing authority: New Jersey Supreme Court Advisory Committee on Professional Ethics, via the NJ Courts Supreme Court Committees page

Original opinion text

Reproduced from a full-text mirror of the official opinion for research purposes. The linked official source controls.

116 N.J.L.J. 353, September 12, 1985

OPINION 574

Investment of Trust Funds

An attorney raises a question as to whether funds held by an attorney temporarily pending the closing of a real estate deal may be placed in a U. S. Government securities fund.

Both RPC 1.5(a) and R. 1:21-6(a) make it clear that such funds may be invested only in New Jersey financial institutions. Such institutions are defined as banks, savings and loan associations, credit unions, and savings banks. The Merrill Lynch Government Fund and other similar funds do not qualify, and an attorney may not deposit money for real estate closings in such funds.