May a Vermont lawyer accept ACH deposits into an IOLTA account, and what if a deposit is reversed?
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This page answers the general question as of 2017. Ask about yours and see what the current Vermont Rules of Professional Conduct say for your facts, with citations.
Plain-English summary
The opinion addressed electronic deposits into lawyer trust accounts, especially ACH transfers that can be reversed after being credited. The requester asked whether such deposits comply with Vermont's trust-account rules when reversal can leave a shortfall.
The committee distinguished ACH transfers from generally irrevocable wire transfers and discussed Vermont Rule 1.15's separation of client and third-party property. It concluded that ACH deposits into IOLTA are permitted. The lawyer may take steps to reduce reversal risk, including asking the bank about blocking reversals or using a separate account for electronic transfers.
The decisive duty after a reversal is Rule 1.15(h): on learning that an uncollected deposit used for a disbursement has failed, the lawyer must immediately act to protect other clients' and third parties' funds held in the trust account. The opinion cited North Carolina State Bar 2013 Formal Opinion 13's discussion of restoring a reversal-related deficit from sources other than other clients' trust funds.
In practice
For an ACH deposit covered by this opinion, acceptance itself is permitted. When a reversal puts other entrusted funds at risk, the opinion calls for immediate protective action upon notice of the failure.
Common questions
Q: Are ACH deposits into a Vermont lawyer's IOLTA account forbidden?
A: No. The committee expressly concluded that accepting them is not a violation of the Vermont Rules of Professional Conduct.
Q: What happens if an ACH credit is reversed?
A: Under Rule 1.15(h), the lawyer must act immediately after learning of the failure to protect other clients' or third parties' funds at risk.
Q: Did the opinion identify ways to reduce reversal risk?
A: Yes. It mentioned asking the bank to block reversals, using a separate IOLTA account for ACH transfers, a client-specific receiving account, and a bank list of entities authorized to withdraw.
Background and rules framework
Vermont Rule 1.15(a)(1) requires separation of client and third-party property from the lawyer's own property, with funds held under Rules 1.15A and 1.15B. Rule 1.15(g) addresses disbursement in reliance on certain not-yet-collected deposits, and Rule 1.15(h) governs the response when such a deposit fails.
Citations and references
Vermont Rules of Professional Conduct:
- Rule 1.15(a)(1), (g), and (h)
- Rules 1.15A and 1.15B
Other opinions cited:
- North Carolina State Bar 2013 Formal Opinion 13
See also
- NC State Bar 2013 Formal Ethics Op. 13: ACH credits and trust accounts
- NC State Bar 2013 Formal Ethics Op. 3: Safekeeping client funds
Source
- Landing page: VBA fees opinions
- Original PDF: Vermont Advisory Opinion 17-01
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