Must a lawyer serving as trustee, guardian, or executor hold those funds in a client trust account under the trust-account rule?

Plain-English summary

The question was whether funds or property a lawyer holds in a fiduciary capacity as a trustee, guardian, or executor must be held in a trust account regulated by RPC 1.14. The committee answered that such funds should not be deposited into an RPC 1.14 trust account; instead they should be maintained by the standards of a prudent fiduciary under Washington law.

The committee made the key question whether the funds and property are actually client funds and property. The Rules of Professional Conduct are mandatory, so if the funds are client funds, the lawyer has no discretion and must hold them under RPC 1.14. But where a lawyer is designated trustee under a trust document, appointed guardian by a court, or named personal representative of a will, the lawyer holds legal title to the assets, and the beneficiaries or ward, who hold only equitable title, are not clients. The same reasoning applies when a lawyer acts in the dual capacity of lawyer and fiduciary, such as serving as both personal representative and lawyer for an estate; the lawyer may, however, pay estate funds into the lawyer's trust account to pay obligations of the estate in furtherance of completing the estate proceedings.

The committee noted that fiduciary duties are extensively codified under RCW Title 11, are subject to Superior Court supervision, and may require investing and managing assets in ways not possible within an interest-bearing lawyer's trust account. It concluded that RPC 1.14 requires all client funds and property to be maintained in conformance with that rule, but that funds and property held outside a lawyer-client relationship as a fiduciary need not be.

Currency note

This opinion was issued in 1988, before the 2006 revisions to the Washington Rules of Professional Conduct. The rule then numbered RPC 1.14, governing safekeeping of client property, corresponds to Model Rule 1.15 and was later renumbered and amended. The cited fiduciary statutes (RCW 11.100.020, 11.100.050) should also be verified against current law. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule or requirement mentioned here.

Common questions

Q: Must a lawyer who is a trustee, guardian, or executor put those funds in a client trust account?

A: Per the opinion, no. The committee was of the opinion that funds held in a fiduciary capacity should not be deposited into an RPC 1.14 trust account, but should be maintained by the standards of a prudent fiduciary under Washington law.

Q: Why aren't fiduciary funds treated as client funds?

A: The committee reasoned that a lawyer who is designated trustee, appointed guardian, or named personal representative holds legal title to the assets, while the beneficiaries or ward hold only equitable title and are not clients, so the funds are not client funds and property under RPC 1.14.

Q: What if the lawyer serves as both lawyer and fiduciary for the same estate?

A: The committee was of the opinion that the same reasoning applies. The lawyer may, however, pay funds from the estate into the lawyer's trust account to pay obligations of the estate in furtherance of completing the estate proceedings.

Background and rules framework

The opinion applies the rule then numbered Washington RPC 1.14, corresponding to Model Rule 1.15, which governs safekeeping of client funds and property, alongside the prudent-fiduciary standard in RCW 11.100.020 and the fiduciary-powers statute RCW 11.100.050. The committee made the analysis turn on legal versus equitable title: where the lawyer holds legal title as a fiduciary and the beneficiaries hold equitable title, the funds are not client funds, so RPC 1.14 does not apply and Washington's fiduciary law governs instead.

Citations and references

Rules of Professional Conduct:

• Washington RPC 1.14 (safekeeping of client property), corresponding to Model Rule 1.15.

Statutes:

• RCW 11.100.020 (prudent-fiduciary standard of care).
• RCW 11.100.050 (application to fiduciaries acting under wills, agreements, court orders, and other instruments).

Cases:

• Osteen v. Estate of Weinberg, 30 Wn. App. 923, 932, 640 P.2d 28 (Wash. Ct. App. 1982), cited on the division of legal and equitable title in a trust.

See also

• WSBA Ethics Op. 1032: whether a lawyer-fiduciary must hold the funds in an RPC 1.14 trust account
• WSBA Ethics Op. 1193: a bank line-of-credit arrangement for trust obligations under Formal Op 177
• WSBA Ethics Op. 1066: whether a client can waive the "qualified" trust-account rule

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=282

Original opinion text

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

Advisory Opinion: 1202
Year Issued: 1988
RPC(s): RPC 1.14; RCW 11.100.020; 11.100.050
Subject: Lawyer as fiduciary; applicability of trust account rule to funds held by lawyer as trustee, guardian or executor

Question: When a lawyer holds funds or property in a fiduciary capacity as a trustee, guardian or executor, must those funds be held in a trust account regulated by the requirements of RPC 1.14, and must such property be maintained in conformance with that rule? Answer: If a lawyer holds funds or property in a fiduciary capacity those funds should not be deposited into a trust account as required by RPC 1.14. The funds or property should be maintained by the standards of a prudent fiduciary under Washington Law. Discussion: Lawyers are often called upon to represent clients and others in a fiduciary capacity rather than as a legal representative, serving as guardian, trustee or executor. In these situations, lawyers are required to manage funds or other assets of the ward, trust or estate. The question arises as to whether such accounts or assets are "funds of a client paid to a lawyer" which must be held in a trust account pursuant to RPC 1.14 or "securities and properties of a client" to be held in compliance with that rule. The key to the inquiry is the determination of whether funds and property in the possession of a lawyer are in fact client funds and property. The Rules of Professional Conduct are mandatory, and therefore if the funds and property are client funds and property, the lawyer would have no discretion but to maintain them as required by RPC 1.14. If, however, they are not client funds or property, then the lawyer as fiduciary is under a duty to beneficiaries to "exercise the judgment and care under the circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs" (RCW 11.100.020). The fundamental characteristic of a trust is that legal and equitable ownership of trust property are divided between two parties. The trustee has bare legal title and the beneficiaries have equitable title. Osteen v. Estate of Weinberg, 30 Wn. App. 923, 932, 640 P.2d 28 (1982). If a lawyer is designated as a trustee under terms of a testamentary or other trust document, appointed as guardian by a court, or named as personal representative of a will, then the lawyer would hold legal title to the assets of the trust or estate. The beneficiaries or ward would not be clients and only hold an equitable ownership in the property. Therefore, a lawyer would not be required to deposit such funds into a trust account maintained pursuant to RPC 1.14. In the situation where a lawyer acts in the dual capacity as lawyer and fiduciary, e.g., acts as personal representative and lawyer for an estate, the same reasoning would apply. The lawyer might, however, pay funds from the estate into the lawyer's trust account for the purpose of paying obligations of the estate in furtherance of the lawyer's obligation to complete the estate proceedings. The responsibilities and powers of fiduciaries have been extensively codified by the legislature under RCW Title 11 and are subject to supervision by the Superior Court. Those include explicit standards regarding the investment and management of funds and properties entrusted to fiduciaries, and require inventories and periodic accountings. The powers granted to and duties imposed on fiduciaries make it clear that a fiduciary is empowered and, depending upon circumstances, may be required to invest and manage trust assets in a manner that would not be possible within an interest-bearing lawyer's trust account. The statute expressly applies to "fiduciaries acting under wills, agreements, court orders and other instruments." RCW 11.100.050. Therefore, the Committee is of the opinion that RPC 1.14 requires that all client funds and property must be maintained in conformance with that rule, but that funds and property held outside of a lawyer/client relationship as a fiduciary need not be held in compliance with RPC 1.14.