Can a lawyer deposit client funds in his general account instead of a trust account if records are kept and the client is paid promptly?

Plain-English summary

A lawyer kept ledger sheets in his general account showing how much of any check was not fee but belonged to a client or someone else, and also kept a separate trust account for client funds held for any period. He explained that running every check with a third-party interest through the trust account required considerable extra bookkeeping, and that many checks deposited in the general account were handled "in and out," with the client's portion issued to him immediately. The inquiry asked whether, with adequate records and prompt disbursement, depositing client funds in the general account violated the Canons.

The Committee said Canon 10's prohibition is against commingling the client's funds with the lawyer's, and that any deposit of a client's money into the general account is a commingling. It noted that the Association of the Bar of the City of New York had consistently held under ABA Canon 11 (the form in which Texas Canon 10 was originally written) that client funds should never be commingled in the attorney's own account, citing ABA Opinions 66 (1926), 296 (1933), and 676 (1945).

As a practical matter, however, the Committee saw no serious objection to handling client funds through the general account when receipt and disbursement occur during a single business day, and said it would hesitate to find a lawyer in violation of the minimum requirements, subject to discipline, where adequate records are kept and the funds are disbursed promptly. It added that this is an area where a lawyer should lean over backward toward strict propriety, and that the extra bookkeeping is one of the burdens of the profession. The ruling was 9-0.

Currency note

This opinion was issued in 1961, under the former Texas Canons of Ethics, which the Texas Disciplinary Rules of Professional Conduct replaced effective January 1, 1990. 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 Treat this page as historical context, not current guidance.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: Is depositing client money in a lawyer's general account commingling?

A: Under this opinion, yes. The Committee said Canon 10 prohibits commingling client funds with the lawyer's, and any deposit of a client's money in the general account is a commingling.

Q: What is the required and better practice?

A: The Committee said strict compliance and the better, recommended practice is to deposit any check or money in which the client has an interest into a trust account and make disbursements from it.

Q: Did same-day handling with good records violate the Canons?

A: The Committee said it would hesitate to find a disciplinable violation where receipt and disbursement occur in a single business day with adequate records and prompt payment, while urging lawyers to lean toward strict propriety.

Background and rules framework

The opinion interprets former Texas Canon 10, on commingling, which the opinion notes was written in the form of ABA Canon 11. The modern analog is ABA Model Rule 1.15, on safekeeping the property and funds of clients and third persons.

Citations and references

Rules of Professional Conduct:

• MR 1.15 (safekeeping property; client trust accounts), as the modern analog
• Texas Canon 10 (former canon); ABA Canon 11 (its original form)

Other opinions cited:

• ABA Opinions 66 (1926), 296 (1933), and 676 (1945): client funds should never be commingled in the attorney's own account

See also

• TX Ethics Op. 404: Keeping Interest on Client Funds
• TX Ethics Op. 391: Advance Fees and Trust Accounts
• CA Op. 1975-36: Unclaimed Client Trust Funds

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-245/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_245.pdf

Original opinion text

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

QUESTION PRESENTED

As a record for his general account, a member keeps ledger sheets which indicate the amount of any check which is not fee and the amount which belongs to a client or someone else. Additionally, the member has a trust account in which are kept all funds which belong to clients and which are being held for any period of time.

It is difficult and requires considerable extra bookkeeping to run through the trust account all checks or monies in which someone else has an interest; and a good many of the checks which are deposited in the general account are done so on an "in and out" proposition in that the client's portion of the check is issued to him immediately.

Under these circumstances, i.e., when adequate records are maintained as to the amount of a client's funds and when these funds are to be disbursed to the client promptly, is it a violation of the Canons of Ethics for a member to deposit a client's funds to the member's general account rather than in a trust fund?

18 Baylor L. Rev. 322 (1966)

COMMINGLING OF A CLIENT'S FUNDS IN A MEMBER'S GENERAL ACCOUNT
It is a strict compliance with the Canons of Ethics and the better and recommended practice that any check or money which is received by a member and in which his client has an interest be deposited in a trust account and disbursements made therefrom.

Canon 10.

The Committee is of the opinion that the prohibition of Canon 10 is against commingling the client's funds and the lawyer's funds, and any deposit of a client's money in the member's general account would constitute a commingling.

Further, the Association of the Bar of the City of New York has consistently held under ABA Canon 11 (Texas Canon 10 is in the form in which this ABA Canon was originally written) that funds of a client should never be commingled in an attorney's own bank account. See ABA Opinions Nos. 66 (1926), 296 (1933) and 676 (1945), which opinions are collected in Opinions on Professional Ethics (Cromwell Foundation Edition, 1956).

However, the committee, as a practical matter, cannot see any serious objection to handling through the general account, rather than the trust account, funds belonging to a client when receipt and disbursement are made during a single business day, and would hesitate to hold that a lawyer is violating the minimum requirements of the Bar so as to be subject to discipline for depositing a client's funds to the member's general account rather than a trust account when adequate records are maintained and when such funds are disbursed promptly to the client. On the other hand, it is felt that this is one of the areas in which a lawyer should lean over backward toward strict propriety and that the additional bookkeeping is merely one of the burdens of the profession. (9-0.)

Tex. Comm. On Professional Ethics, Op. 245 (1961)