Can a Washington lawyer route client trust funds through a separate 'disbursing account' to capture float or earn free banking services?

Plain-English summary

The committee considered a lawyer who held client funds in an IOLTA account and paid clients and nonclients by writing trust-account checks to the payee. The lawyer was offered free or reduced-price services, or other benefits, if the lawyer would add a non-IOLTA "disbursing account": instead of paying the payee directly from trust, the lawyer would write a trust check to the disbursing account and then write a second check from that account to the payee. The benefit arose from the "float" on the disbursing account.

The committee concluded the lawyer could not use such an account. It read RPC 1.15A(c)(1) to require lawyers to deposit and hold in a trust account all funds belonging to clients and third persons, and RPC 1.15A(i)(1) to require, in specified situations, that the funds be placed in a pooled interest-bearing (IOLTA) account. The committee found that RPC 1.15A makes no exception for disbursing accounts and saw no basis for reading one into the rule, adding that the purpose of the trust-account rules, to maximize protection of client funds, is not served by letting those funds pass through a disbursing account. Having answered the question under RPC 1.15A, the committee said it did not need to consider whether using a disbursing account for the lawyer's benefit would also raise conflict-of-interest problems under RPC 1.7(b) and 1.8(a).

Currency note

This opinion was issued in 1996 and amended in 2009. The amended text references the current Washington Rules of Professional Conduct (RPC 1.15A and its subsections). Later rule amendments or opinions may still have changed the analysis. Treat this page as historical context, not current guidance, and verify against the current rules before relying on any specific provision mentioned here.

Common questions

Q: Can a lawyer move client trust funds through a second "disbursing" account to earn float or free banking?

A: The committee said no. It concluded RPC 1.15A requires client and third-person funds to be held in trust and creates no exception for a disbursing account, so trust funds could not be routed through one.

Q: Why did the lack of an express exception matter?

A: The committee found no basis to read an exception into RPC 1.15A by interpretation, and reasoned that letting trust funds pass through a disbursing account does not serve the rule's purpose of maximizing protection of client funds.

Q: Did the committee decide the conflict-of-interest question?

A: No. Because the answer under RPC 1.15A resolved the inquiry, the committee said it did not need to consider whether using the account for the lawyer's benefit would raise problems under RPC 1.7(b) and 1.8(a).

Background and rules framework

The opinion interpreted RPC 1.15A (the Washington counterpart to Model Rule 1.15, safekeeping of property), which requires a lawyer to deposit and hold client and third-person funds in a trust account and, in specified situations, in a pooled interest-bearing IOLTA account. The committee also identified, without deciding, the conflict-of-interest rules that a lawyer's personal benefit from the arrangement could implicate: RPC 1.7(b) (Model Rule 1.7) and RPC 1.8(a) (Model Rule 1.8).

Citations and references

Rules of Professional Conduct:

• Model Rule 1.15 / Washington RPC 1.15A, 1.15A(c)(1), 1.15A(i)(1) (safekeeping of client and third-person funds; IOLTA)
• Model Rule 1.7 / Washington RPC 1.7(b) (concurrent conflicts; not reached)
• Model Rule 1.8 / Washington RPC 1.8(a) (business transactions with a client; not reached)

See also

• WSBA Ethics Op. 2108: Web Payment Processing and Trust Funds
• WSBA Ethics Op. 917: Missing Client and Trust Funds
• ABA Formal Op. 505: Advance Fees and the Trust Account
• NY State Bar Op. 946: Trust-Account Payments to Others

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=1535

Original opinion text

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

Advisory Opinion: 193
Year Issued: 1996
RPC(s): RPC 1.15A, 1.7(b), 1.8(a)
Subject: Disbursal Accounts

Facts:

As required by RPC 1.15A Lawyer generally maintains client funds in an IOLTA account. When funds held in trust are payable to a client or nonclient, Lawyer simply writes a check on that account to the payee.

Recently, Lawyer has been told that Lawyer can secure free or reduced price services or obtain other benefits if Lawyer will use a non-IOLTA disbursing account in addition to an IOLTA account. Instead of writing a trust account check directly payable to the payee, Lawyer would write a check payable to the disbursing account and would then, in turn, cause a check to be written on that account to the payee. The potential for benefit arises because of the "float" on the disbursing account.

Question:

May Lawyer use such a disbursing account?

Conclusion:

No.

Discussion:

RPC 1.15A(c)(1) requires that lawyers deposit and hold in a trust account all funds belonging to the client and third persons. Under RPC 1.15A(i)(1), in specified situations, “the funds must be placed in a pooled interest-bearing trust account” (an IOLTA account). RPC 1.15A makes no exception for disbursing accounts, and we see no basis for reading one into the rule as a matter of interpretation. Moreover, the obvious purpose behind the trust account rules — to maximize the degree of protection accorded client funds — is not served by allowing those funds to pass through a disbursing account.

In light of our answer under RPC 1.15A, we need not consider whether the use of a disbursing account for Lawyer’s benefit would create conflict of interest problems under RPC 1.7(b) and 1.8(a).

[amended 2009]