Under the trust-account rule, can a lawyer count service costs when deciding whether to open a separate account for briefly held funds, what client 'property' must be safeguarded, and who must be notified?

Plain-English summary

Opinion E-88-5 answered four questions about client trust funds and property under SCR 20:1.15. The first asked whether, given SCR 20:1.15(c)(3)b's requirement that a lawyer determine whether a client would receive a positive net return after the cost of establishing and administering an account (including the cost of lawyer services), a lawyer on a contingent fee who briefly holds a check in trust for about ten days to ensure it clears may consider the cost of the lawyer's and staff's services even though those services will not be billed to the client. The committee answered yes, citing SCR 20:1.15(c)(3)b and SCR 20:1.15(c)(4), which relieves lawyers acting in good faith and with sound judgment from disciplinary charges.

The second question asked whether the SCR 20:1.15(e) record-keeping rules were retroactive for a pooled account lacking separate subsidiary ledgers as of the rule's January 1, 1988 effective date. The committee declined to opine, stating that what accounting measures are required to bring records into compliance was not within its jurisdiction or expertise and that the Board of Attorneys Professional Responsibility could presumably provide guidance. On the third question, the committee construed the phrase "other property" in SCR 20:1.15 to include any and all property held by a lawyer in trust that has any monetary value or legal or other importance to the person to whom it belongs, citing Matter of Grubb. On the fourth question, asking whether a lawyer must notify a third party holding a lien or other interest in the client's property upon receipt and render a full accounting on request, the committee answered yes to both.

Currency note

This opinion was issued in 1988, before Wisconsin's July 1, 2007 adoption of the revised Rules of Professional Conduct for Attorneys (the state's Ethics 2000 update). The trust-account and safekeeping rule SCR 20:1.15 has since been substantially revised and renumbered. 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 Treat this page as historical context, not current guidance.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: Can a lawyer count unbilled service costs when deciding whether to open a separate account for funds held only a few days?

A: Per the opinion, yes. The committee concluded SCR 20:1.15(c)(3)b lets the lawyer consider the cost of the lawyer's and staff's services even when those costs are not billed to the client.

Q: What counts as "other property" that must be safeguarded?

A: The committee construed it broadly to mean any property held in trust that has monetary value or legal or other importance to its owner, such as abstracts, insurance policies, or tax returns held for the matter.

Q: Must a lawyer notify a third party with a lien on the client's property?

A: Yes. The committee concluded the lawyer must notify the third party upon receipt and, on request, render a full accounting regarding the property.

Background and rules framework

The opinion interpreted SCR 20:1.15 / Model Rule 1.15 (safekeeping property; trust accounts), including the net-return determination in SCR 20:1.15(c)(3)b, the good-faith safe harbor in SCR 20:1.15(c)(4), the "other property" safekeeping requirement in SCR 20:1.15(a), and the third-party notice and accounting duties in SCR 20:1.15(b).

Citations and references

Rules of Professional Conduct:

• Wis. SCR 20:1.15 / Model Rule 1.15 (safekeeping property; trust accounts)

Cases:

• Matter of Grubb, 99 Wash. 2d 690, 663 P.2d 1346 (1983), scope of property held in trust

See also

• WI Ethics Op. E-09-01: Third-Party Liens on Trust Funds
• WI Ethics Op. EF-16-03: Surrendering the File on Termination
• WI Ethics Op. EF-17-01: Retention and Destruction of Files

Source

• Landing page: https://www.wisbar.org/formembers/ethics/pages/formal-opinions.aspx
• Original PDF: https://www.wisbar.org/formembers/ethics/Ethics%20Opinions/E-88-5.pdf