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Tips on Setting Up and Maintaining a Trust Account

NOTE: THIS IS A GENERAL OVERVIEW DESIGNED TO ANSWER COMMONLY ASKED QUESTIONS. IT IS NOT EXHAUSTIVE AND IT DOES NOT ATTEMPT TO COVER EVERY SITUATION OR EVERY RULE RELATED TO ATTORNEYS' TRUST ACCOUNTS IN GEORGIA.

******PLEASE ALSO NOTE THAT WHILE ALL SUGGESTIONS GIVEN IN THIS DOCUMENT CONSTITUTE CURRENTLY ACCEPTABLE PRACTICE, THE SECTIONS REGARDING NSF CHECKS AND THE REQUIREMENT THAT ACCOUNTS BE SET UP IN AN APPROVED BANK RELY ON REVISIONS TO THE DISCIPLINARY STANDARDS THAT OFFICIALLY TOOK EFFECT JANUARY 1, 1996, AND THE NEW GEORGIA RULES OF PROFESSIONAL CONDUCT WHICH TOOK EFFECT JANUARY 1, 2001.******* 

THE STATE BAR'S RULES REGULATING TRUST ACCOUNTS ARE ATTACHED TO PROVIDE FURTHER GUIDANCE. IF YOU HAVE AN ETHICAL QUESTION TO WHICH YOU CANNOT FIND AN ANSWER AFTER READING THIS INFORMATION, PLEASE CONTACT THE ETHICS HOTLINE AT 1-800-682-9806 BEFORE TAKING ANY ACTION. 

IF YOU HAVE A QUESTION CONCERNING THE MECHANICS OF TRUST ACCOUNT SETUP OR BOOKKEEPING, PLEASE CONTACT THE LAW PRACTICE MANAGEMENT PROGRAM AT 1-800-334-6865 EXT. 770. 

IF YOU HAVE A QUESTION CONCERNING THE GEORGIA BAR FOUNDATION'S IOLTA PROGRAM, PLEASE CONTACT THE FOUNDATION AT 404-527-8765 

This document was prepared by the State Bar of Georgia's Law Practice Management Program as a service to members of the Bar. We gratefully acknowledge the assistance of the Office of the General Counsel of the State Bar of Georgia, the Georgia Bar Foundation, and the Institute of Continuing Legal Education in Georgia in its production.

TABLE OF CONTENTS 

I. About Trust Accounts
II. Setting Up a Trust Account
III. Receiving and Disbursing from the Trust Account
IV. Maintaining Trust Account Records
V. Relevant Rules of Professional Conduct
VI. Selected Ethics Opinions
VII. Sample Trust Account Ledgers

I. About Trust Accounts

What is a trust account (escrow account)? What types of funds are placed in one?

A trust account is a separate bank account set up to hold any money you have received in trust on behalf of a client or a third party. Typical funds placed in a trust account include earnest monies or down payments on loan closings, settlement proceeds or damages payments that have not yet been disbursed to the client or creditors, advances that the client has given you against future costs of litigation, or advance payments for fees that you have not yet earned. Lawyers in Georgia tend to use both the terms "attorney trust account" and "attorney escrow account", but we feel "trust account" is a better term since "escrow account" has a specific meaning related to real estate practice and may be confused with other types of accounts that can legitimately be set up by real estate and other professionals. See Rule 1.15 (III) b.

Does it have to be an interest-bearing account?

Yes. The interest may be payable to the client or payable to the Georgia Bar Foundation, depending on the type of trust account (IOLTA or non-IOLTA) that has been set up, but as of July 1, 1991 all accounts must be interest-bearing unless the attorney has been granted a specific exemption described below.

What is an IOLTA account?

An IOLTA account is a special type of trust account set up to hold all trust funds you receive that are nominal in amount or that will be held for a short time. The interest that accrues on this account is remitted automatically by your bank to the Georgia Bar Foundation to award in grants. Participation in the IOLTA program is mandatory; that is, if you receive any nominal funds or short-term deposits, you must place them in an IOLTA account unless you qualify for an exemption (explained below) or you decide that you will track the interest earned for each client in your pooled account and remit that interest to the client.

The Georgia Bar Foundation will sometimes grant a request for an exemption from IOLTA if:

If you feel that one of the above applies to you and want to request an exemption, make your request in writing to the Foundation and explain the reasoning behind it. You will receive a written answer from the Foundation. If your request is approved, the exemption is provided for a period of three years, after which it must be renewed. If the nature of your practice changes during the exemption period so that your average balance would consistently generate enough interest to offset charges, it's your responsibility to convert the account to an IOLTA account.

Please note that having an exemption from IOLTA does not mean that you have been given permission not to have a trust account; it simply means that your trust account does not have to be a pooled interest-bearing account complying with IOLTA rules. If you hold funds in trust for clients, you will always need to have a trust account.

What if they're not short-term or nominal?

In that case, you would generally set up an interest-bearing account for the benefit of that particular client, using the client's tax identification number and remitting the interest to the client. If you do place funds in anything other than a checking account, be careful that the money is safe (don't place trust funds in high-risk investments, no matter what your client agrees to), accessible (don't place funds in a location where they are nonliquid or acquire withdrawal penalties), and complies with the rules regulating proper description of the account.

Who defines "short term" and "nominal"?

You do, based on your own judgment of what would be best for your client. Remember that you or your client will be responsible for all account charges for a non-IOLTA account, and consequently, with today's low interest rates, a deposit might have to be quite large to offset the cost of setting up and maintaining the account. You can take such things into consideration in deciding whether or not to set up a separate account. The lawyer's determination that these funds are nominal or short term is not a basis for discipline. See Rule 1.15 (II) c. 3.

Do all lawyers have to have trust accounts?

All attorneys who hold client funds or holds funds in any fiduciary capacity must have trust accounts. See Rule 1.15 (II). If you never receive client or other fiduciary money or property that you must keep safe -- if, for example, you are a government lawyer -- then you may not need to set up a trust account. But if you ever have client or fiduciary funds, you must set up an account to hold them. You cannot argue that since you "rarely" receive money in trust, you have no need of a trust account.

Are there any situations where I or my firm can keep the interest earned on a trust account?

Absolutely not. Sorry about that.

What about property that isn't money?

If you keep property in trust for a client or in any other fiduciary capacity, like potential exhibits in litigation, securities, or personal property as surety for payment of your fees, you must also provide for its safekeeping. See Rule 1.15 (II) a. A safe deposit box is the best means of doing this.

II. Setting Up a Trust Account

How do I set up an account?

You will need to go to an "approved institution" to set up your trust account. See Rule 1.15 (III) c. 1. An approved institution is any bank, credit union, or savings and loan in Georgia that has agreed to abide by the Bar's new reporting requirements for NSF checks (see the attached list of Standards for an explanation of this reporting requirement). The Bar will publish a list of institutions that have met these requirements. You may be able to set up an account at a non-approved bank only if there are no banks in your county that have agreed to comply. See Rule 1.15 (III) c. 1. ii. Note: it's usually a good idea to go to a main office and not a small branch office to set up your account. In the main, downtown offices you are more likely to find someone who is used to handling attorney trust accounts. If you are setting up an IOLTA account, we suggest you provide the bank with the Notice to Financial Institution attached to this pamphlet; this will give them the correct tax ID number (58-0552594) to place on the account. If you are setting up a non-IOLTA trust account, you will want to provide the bank with your client's tax ID number. Do not use your firm's tax ID number, as using your tax ID will result in the interest remaining in your account, being counted as firm income, and taxed accordingly.

If you have several accounts at the same bank, you may want to check your first statement to make sure that the IOLTA account has been set up properly, the account properly designated, and that the correct tax I.D. number is on the account. Make sure you understand the bank's policy for dealing with service charges on IOLTA accounts as well. Some banks will waive the fees or deduct them from interest paid to the Foundation; others charge fees to the attorney or charge the attorney for the difference between the earned interest and the amount of the fee. In addition, some banks will take the charges directly out of the trust account, while others assess the firm's operating account for the IOLTA charges so as not to affect the trust account balance.

If at all possible, try to arrange for your bank to withdraw any fees from an account other than the trust account. If the bank takes its charges out of your trust account, you will need to (1) have a small cushion of your own funds in the account to cover expenses and (2) check the amount and reconcile on a monthly basis. See Rule 1.15 (II) b. Having sufficient personal funds in your trust account to cover service charges or extraordinary expenses is not considered a violation of the rules against commingling funds.

Should I have all my bank accounts (office and trust accounts) at the same bank?

There are several factors you will want to take into consideration here. First of all, if you are a real estate attorney and do a lot of closings on behalf of a bank, the bank will probably want you to place your IOLTA account there for the sake of convenience. (This can result your having in multiple IOLTA accounts—don't worry, that's OK.) You may also have a banking relationship of long standing with a particular institution and wish to keep all your business there.

That being said, there are still some practical reasons for not having your trust account and any personal or general business accounts at the same bank. The primary reason is the possibility of error. If you have multiple accounts, you, your staff, or the bank may occasionally confuse one for the other. You or your staff can also confuse a deposit slip for one account with a deposit slip for another, or a checkbook from the trust account for one from the office account. And last, many banks have a policy of automatically withdrawing funds from any account with your name on it to cover shortages in another. For example, you could overdraw your office account and the bank, in an attempt to be helpful, might withdraw funds from your trust account to cover the overdraft. Usually, this is only a problem if you haven't labeled your trust account properly or if it's a non-IOLTA account, but you may want to discuss this with your bank if you have multiple accounts there.

Who should sign the account?

You can designate anyone you choose to be the signatory on your account; it does not have to be you, and it does not even have to be a lawyer. However, because of the weighty responsibility the lawyer has towards his or her client and that client's property, coupled with the likelihood of severe discipline if money is stolen from the account, it is not usually desirable to have anyone but the partner or managing partners sign the trust account checks. If you need to have an alternate signatory because you are frequently out of the office, then at least take the precaution of having all trust account statements delivered to your desk unopened each month.

III. Receiving and Disbursing from the Trust Account

What if the client gives me money and I lose it or my office is burglarized before I can deposit it?

You're responsible for your client's money from the moment you receive it. Take sensible precautions to avoid misplacing or misfiling checks or cash, and don't hold the money any longer than necessary before depositing it into your trust account.

If I am keeping advance payments from a client, at what point after I do the work can I move the money out of the trust account?

You can and should move the money out of your trust account as soon as it is earned. See Rule 1.15 (III) b. Your client should be aware, hopefully from the signed fee agreement you have executed, that money will be withdrawn and transferred as it is earned. Each time you make a withdrawal, be sure to notify the client. You should send your client regular statements that indicate how much work has been performed and how much money transferred from the trust account to your office account, even when the client does not yet owe you money to replenish the amount in trust. That way, you will not have to worry about the client complaining at the end of the matter that he or she "had no idea it was going to cost that much" or "didn't realize it took that much work."

Also, remember that if you hold back money that you are entitled to (i.e., that you have already earned) in your trust account instead of transferring it to a location where it will be counted as firm or personal income, the I.R.S. might want to have a conversation with you about this. Too many lawyers "accidentally" forget to transfer funds until after the end of the year, thereby lowering their taxable income for that year.

What if I write a check from the trust account but it's never cashed?

This is an annoying situation that most attorneys have to deal with at one time or another. From time to time, a witness who receives an expense check, a photographer who has been reimbursed, or even a client who gets a check for the balance in trust at the end of the matter may not bother to cash the check. This most frequently happens for small reimbursements of under $10.00 or so.

There is no completely satisfactory way to deal with this problem. The money does not, of course, belong to you or to your firm, and so it cannot be transferred to your office accounts. You can always write the payments as something other than a check, something that is considered cashed on receipt like a money order or cashier's check, but this is expensive for you and requires a separate trip to the bank. (Never make ATM withdrawals from a trust account! Don't even get an ATM card for the account.) Generally, if you have money in the account and have made diligent inquiry for the owners, the money can be returned to the client if it was paid out on behalf of a third party, but it must be kept by you if it's the client's money until it can be disposed of in accordance with the Unclaimed Property Act in your state. (FA Opinion #98-2)

IV. Maintaining Trust Account Records

What kind of records do I need to keep for my account?

The rules, and common sense, stipulate that you must always know your account balance and individual client balances in grouped or IOLTA accounts. See Rule 1.15 (II) b. This will necessitate your keeping at least two sets of records:


Commonly these are referred to as your "general trust account ledger" and your "client ledger". You need both, because without the general or account ledger you don't know the grand total in your account, and without the client ledger you don't know the balance you hold for any given client.

Each time you make an entry in one of these ledgers, you should record the amount of the transaction, the date of the transaction, the client or matter on whose behalf the transaction is being made, a description of the transaction, and the check number if it's a disbursement. If you have a computerized trust accounting system, or a manual one-write system, you'll only need to make each entry once; otherwise, you'll need to record each entry twice, once on the general ledger and once on the client ledger.

When you make a deposit, you'll also need to fill out a full deposit slip, and if you're paid in cash, you'll need to fill out a separate cash receipts slip and keep a copy. Please remember to take special care in cash transactions, since there is no distinguishing mark to let you know whose cash you have! And, of course, specific I.R.S. reporting and recordkeeping requirements may apply to large cash deposits.

Can I Use a Computer Program to Do my Accounting?

Yes. For most attorneys, this would be a very sensible decision that would considerably lessen the possibility of error, although if you have very few trust account transactions, it may not be worth the time and trouble. In choosing a computer program, you should consider whether it will let you track all the information you need, and in the format in which you need it. For example, a program that did not provide a place for you to describe the transaction or input an identifying file number would not be adequate for your purposes. Also bear in mind that many general purpose accounting programs do not understand the concept of trust funds, especially accounts that may hold funds for many different clients. This can result in problems ranging from an inability to calculate an individual client balance within the trust account to a propensity to count trust account funds as firm income. Because of this, we recommend that attorneys use programs designed to handle law firm trust accounting, rather than off-the-shelf business accounting packages.

How Should I Handle Account Maintenance and Review?

Once you have your account properly set up, don't sabotage your efforts by letting account maintenance slide. Every month, when the statements come from the bank, you should reconcile the account balance or have your bookkeeper or accountant do it for you. Because you are handling someone else's money, not your own, this step should be assigned a high priority in your office procedures. Reviewing and reconciling the accounts on an irregular basis can let simple errors slip past and build until they are cause for a client grievance. Just as with your home accounts, one error can lead to another error, making it difficult if not impossible to trace the problem back to its source once more than a few more checks have been written.

When reconciling your balance, make note of missed numbers and ascertain the reason for them. Make sure that you review any service charges assessed on the account to determine if they are accurate and to check that your general ledger reflects them.

Do not throw out any records that you keep on your account, such as ledgers, bank statements, deposit slips, or cancelled checks. You are required to keep all this information for at least six years after the termination of your client's case (Bar Rule 1.15(F)(a). You may have reasons that relate to a particular matter for keeping the information even longer.

What if I Bounce a Check?

If you write a check from your trust account that does not clear due to insufficient funds, and it is not honored within three business days, the bank will send a report to the Bar notifying them of this fact. You will be given an opportunity to explain the reason for the returned check, but if the Disciplinary Board decides that the circumstances constitute "sufficient evidence" of a threat of harm to your clients or the public, it may be able to audit your trust account (see the attached Rule 1.15 (III) f. and Bar Rule 4 – 111 as attached for details).

V. Relevant Rules of Professional Conduct

State Bar of Georgia Rule 4-102(d),
Rules of Professional Conduct, Rule 1.15 (I – III)
RULE 1.15(I) SAFEKEEPING PROPERTY - GENERAL

(a) A lawyer shall hold property of clients or third persons that is in a lawyer's possession in connection with a representation separate from the lawyer's own property. Funds shall be kept in a separate account maintained in an approved institution as defined by Rule 1.15(III)(c)(1). Other property shall be identified as such and appropriately safeguarded. Complete records of such account funds and other property shall be kept by the lawyer and shall be preserved for a period of six years after termination of the representation.

(b) Upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person. Except as stated in this rule or otherwise permitted by law or by agreement with the client, a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive and, upon request by the client or third person, shall promptly render a full accounting regarding such property.

(c) When in the course of representation a lawyer is in possession of property in which both the lawyer and another person claim interests, the property shall be kept separate by the lawyer until there is an accounting and severance of their interests. If a dispute arises concerning their respective interests, the portion in dispute shall be kept separate by the lawyer until the dispute is resolved.

The maximum penalty for a violation of this Rule is disbarment.

Comment

[1] A lawyer should hold property of others with the care required of a professional fiduciary. Securities should be kept in a safe deposit box, except when some other form of safekeeping is warranted by special circumstances. All property which is the property of clients or third persons should be kept separate from the lawyer's business and personal property and, if monies, in one or more trust accounts. Separate trust accounts may be warranted when administering estate monies or acting in similar fiduciary capacities.

[2] Lawyers often receive funds from third parties from which the lawyer's fee will be paid. If there is risk that the client may divert the funds without paying the fee, the lawyer is not required to remit the portion from which the fee is to be paid. However, a lawyer may not hold funds to coerce a client into accepting the lawyer's contention. The disputed portion of the funds should be kept in trust and the lawyer should suggest means for prompt resolution of the dispute, such as arbitration or interpleader. The undisputed portion of the funds shall be promptly distributed.

[3] Third parties, such as a client's creditors, may have just claims against funds or other property in a lawyer's custody. A lawyer may have a duty under applicable law to protect such third-party claims against wrongful interference by the client, and accordingly may refuse to surrender the property to the client. However, a lawyer should not unilaterally assume to arbitrate a dispute between the client and the third party. The obligations of a lawyer under this Rule are independent of those arising from activity other than rendering legal services. For example, a lawyer who serves as an escrow agent is governed by the applicable law relating to fiduciaries even though the lawyer does not render legal services in the transaction.

[4] A "clients' security fund" provides a means through the collective efforts of the bar to reimburse persons who have lost money or property as a result of dishonest conduct of a lawyer. Where such a fund has been established, a lawyer should participate.

RULE 1.15(II) SAFEKEEPING PROPERTY- TRUST ACCOUNT AND IOLTA

(a) Every lawyer who practices law in Georgia, whether said lawyer practices as a sole practitioner, or as a member of a firm, association, or professional corporation, and who receives money or property on behalf of a client or in any other fiduciary capacity, shall maintain or have available a trust account as required by these Rules. All funds held by a lawyer for a client and all funds held by a lawyer in any other fiduciary capacity shall be deposited in and administered from such account.

(b) No personal funds shall ever be deposited in a lawyer's trust account, except that unearned attorney's fees may be so held until the same are earned. Sufficient personal funds of the lawyer may be kept in the trust account to cover maintenance fees such as service charges on the account. Records on such trust accounts shall be so kept and maintained as to reflect at all times the exact balance held for each client or third person. No funds shall be withdrawn from such trust accounts for the personal use of the lawyer maintaining the account except earned attorney's fees debited against the account of a specific client and recorded as such.

(c) All client's funds shall be placed in either an interest-bearing account with the interest being paid to the client or an interest-bearing (IOLTA) account with the interest being paid to the Georgia Bar Foundation as hereinafter provided.



The maximum penalty for a violation of Rule 1.15(II)(a) and Rule 1.15(II)(b) is disbarment. The maximum penalty for a violation of Rule 1.15(II)(c) is a public reprimand.

Comment

[1] The personal money permitted to be kept in the lawyer's trust account by this Rule shall not be used for any purpose other than to cover the bank fees and if used for any other purpose the lawyer shall have violated this Rule. If the lawyer wishes to reduce the amount of personal money in the trust account, the change must be properly noted in the lawyer's financial records and the monies transferred to the lawyer's business account.

[2] Nothing in this Rule shall prohibit a lawyer from removing from the trust account fees which have been earned on a regular basis which coincides with the lawyer's billing cycles rather than removing the fees earned on an hour-by-hour basis.

RULE 1.15(III) RECORD KEEPING; TRUST ACCOUNT OVERDRAFT NOTIFICATION; EXAMINATION OF RECORDS

(a) Required Bank Accounts: Every lawyer who practices law in Georgia and who receives money or other property on behalf of a client or in any other fiduciary capacity shall maintain, in an approved financial institution as defined by this Rule, a trust account or accounts, separate from any business and personal accounts. Funds received by the lawyer on behalf of a client or in any other fiduciary capacity shall be deposited into this account. The financial institution shall be in Georgia or in the state where the lawyer's office is located, or elsewhere with the written consent and at the written request of the client or third person.

(b) Description of Accounts:


(c) Procedure:


The maximum penalty for a violation of this Rule is disbarment.

Comment

[1] Each financial institution wishing to be approved as a depository of client trust funds must file an overdraft notification agreement with the State Disciplinary Board of the State Bar of Georgia. The State Bar of Georgia will publish a list of approved institutions at least annually.

[2] The overdraft agreement requires that all overdrafts be reported to the Office of General Counsel of the State Bar of Georgia whether or not the instrument is honored. It is improper for a lawyer to accept "overdraft privileges" or any other arrangement for a personal loan on a client trust account, particularly in exchange for the institution's promise to delay or not to report an overdraft. The institution must notify the Office of General Counsel of all overdrafts even where the institution is certain that its own error caused the overdraft or that the matter could have been resolved between the institution and the lawyer within a reasonable period of time.

[3] The overdraft notification provision is not intended to result in the discipline of every lawyer who overdraws a trust account. The lawyer or institution may explain occasional errors. The provision merely intends that the Office of General Counsel receive an early warning of improprieties so that corrective action, including audits for cause, may be taken.

Audits

[4] Every lawyer's financial records and trust account records are required records and therefore are properly subject to audit for cause. The audit provisions are intended to uncover errors and omissions before the public is harmed, to deter those lawyers who may be tempted to misuse client's funds and to educate and instruct lawyers as to proper trust accounting methods. Although the auditors will be employed by the Office of General Counsel of the State Bar of Georgia, it is intended that disciplinary proceedings will be brought only when the auditors have reasonable cause to believe discrepancies or irregularities exist. Otherwise, the auditors should only educate the lawyer and the lawyer's staff as to proper trust accounting methods.

[5] An audit for cause may be conducted at any time and without advance notice if the Office of General Counsel receives sufficient evidence that a lawyer poses a threat of harm to clients or the public. The Office of General Counsel must have the written approval of the Chairman of the Investigative Panel of the State Disciplinary Board and the President-elect of the State Bar of Georgia to conduct an audit for cause.

VI. Selected Ethics Opinions

STATE BAR OF GEORGIA

ISSUED BY THE SUPREME COURT ON SEPTEMBER 20, 1991

FORMAL ADVISORY OPINION NO. 91-2 (Proposed Formal Advisory Opinion No. 86-R12)

ADVANCE FEE PAYMENTS


Question Presented: Whether a lawyer may deposit into a general operating account a retainer that represents payment of fees yet to be earned.

The question posed by correspondent is not clear. "Fees yet to be earned" are prepaid fees. "Prepaid fees" also include "fixed" or "flat fees," which are not earned until the task is completed. The terms "retainer" and "prepaid fees" have different meanings. For purposes of clarity, the terms are defined as here used.

A retainer is "...the fee which the client pays when he retains the attorney to act for him, and thereby prevents him from acting for his adversary." Black's Law Dictionary (5th ed. 1979). Thus, retainer fees are earned by the attorney by agreeing to be "on call" for the client and by not accepting employment from the client's adversaries. McNulty, George & Hall v. Pruden, 62 Ga. 135, 141 (1878).

A "flat" or "fixed" fee is one charged by an attorney to perform a task to completion, for example, to draw a contract, prepare a will, or represent the client in court, as in an uncontested divorce or a criminal case. Such a fee may be paid before or after the task is completed.

A "prepaid fee" is a fee paid by the client with the understanding that the attorney will earn the fee as he or she performs the task agreed upon.

Under these various definitions, one can reasonably take the position that "retainers" and "flat fees" may be placed in the general operating account when paid. Prepaid fees may be placed in a trust account until earned.

Terminology as to the various types of fee arrangements does not alter the fact that the lawyer is a fiduciary. Therefore, the lawyer's duties as to fees should be uniform and governed by the same rules regardless of the particular fee arrangement. Those duties are as follows:

To have a clear understanding with the client as to the details of the fee arrangement prior to undertaking the representation, preferably in writing.

To return to the client any unearned portion of a fee.

To accept the client's dismissal of him or her (with or without cause) without imposing any penalty on the client for the dismissal.

Comply with the provisions of Standard 31 as to reasonableness of the fee.

The law is well settled that a client can dismiss a lawyer for any reason or for no reason, and the lawyer has a duty to return any unearned portion of the fee. In the Matter of Collins, 246 Ga. 325, 271 S.E.2d 473 (1980).

The exercise of the right to discharge an attorney with or without cause does not constitute a breach of contract because it is a basic term of the contract, implied by law into it by reason of the nature of the attorney-client relationship, that the client may terminate that contract at any time.

Henry, Walden & Davis v. Goodman, 294 Ark. 25, 741 S.W. 2d 233 (1987).

The client, of course, may not be penalized for exercising the right to dismiss the lawyer. Id. In view of these duties, a lawyer need not place any fees into a trust account absent special circumstances necessary to protect the interest of the client. Such circumstances may be the agreement of the parties, the size and amount of the fee, and the length of time contemplated for the undertaking.

STATE BAR OF GEORGIA
ISSUED BY THE SUPREME COURT OF GEORGIA ON SEPTEMBER 9, 1994
FORMAL ADVISORY OPINION NO. 94-2 (Proposed Formal Advisory Opinion No. 89-R10)

Ethical Considerations Applicable to a Lawyer
Paying Funds to Others Over a Client's Objections


In those cases where it is not possible to ascertain who is entitled to disputed funds held by the lawyer, the lawyer may hold such disputed funds in the lawyer's trust account for a reasonable period of time while endeavoring to resolve the dispute. If a resolution cannot be reached, it would be appropriate for a lawyer to interplead such disputed funds into a court of competent jurisdiction.

In every case a lawyer has a duty to represent the client and the client's interest. The client's instructions should be followed whenever possible within the restrictions provided in the Standards, including, but not limited to, Standard 45, and applicable law.

State Bar of Georgia
State Disciplinary Board
November 20, 1981
ADVISORY OPINION NO. 28
*Advisory Opinion No. 28 has been withdrawn by the Formal Advisory Opinion Board. Please see current listing of Advisory Opinions for further information.

Guidelines for Attorneys Using Sight Drafts in Closing Matters

The State Disciplinary Board has been asked to consider what restrictions, if any, should be placed upon the common practice of closing attorneys disbursing against sight drafts, personal checks, and similar items other than cash or collected drafts. In addition to ethical aspects, there are certain practical problems involved in requiring cash, cashier's checks, or certified checks in real estate closings. The Board of Governors has requested advice from the State Disciplinary Board as to what position should be taken on this issue.

The State Disciplinary Board has considered comments and suggestions received, has reviewed past correspondence regarding this matter, as well as certain memos and articles relating thereto.

The State Disciplinary Board finds that:

1. There would be possible disruption to the real estate closing practice if cash equivalent is required at each closing;

2. A real estate closing account is an account of accommodation and one of convenience;

3. The State Disciplinary Board concludes that engaging in this practice is a business question for each attorney and that any attorney who closes a real estate transaction on a sight draft or a similar item is personally responsible for any check written by such closing attorney on such a transaction. Such a closing attorney has not acted unethically unless it was known, or there was reason to know, that the sight draft or similar item would not be honored.

In all cases closed on sight drafts, documented drafts, or other uncollected funds, the attorney is bound to disclose to the parties that the disbursements are made subject to said sight drafts, or other drafts, being honored by the financial institution on which said draft, or other drafts, are drawn.

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