Feb. 17, 2021 – You’ve lost contact with a former client, who has received settlement funds that are now in your trust account. How long should you keep trying to contact the client, and what do you do if you are still unsuccessful?

Question

I represented a client on a small personal injury action a few years ago. The client agreed to a small settlement, and when I received the settlement, I deposited the funds in my trust account, withdrew my fee, and attempted to contact the client.

The client, however, did not respond to phone calls or emails, and the letters we sent were returned. I had my office staff attempt to locate the client using online search tools, but to no avail. Over the course of the last 18 months, my staff has periodically attempted to locate the client.

What do I do with the money sitting in my trust account when I can’t find the owner? I looked at SCR 20:1.15, the trust account rule, and could not find an answer.

Answer

The ethics hotline gets many questions about what to do with abandoned or unclaimed funds in lawyer’s trust accounts, and the reason for all the questions is that there is no answer in the disciplinary rules.

There is an answer, however, in state statutes. The Unclaimed Property Office in the Wisconsin Department of Revenue and the Office of Lawyer Regulation (OLR) consider unclaimed or abandoned funds in a lawyer trust account to be unclaimed property, as described in Wis. Stat. section 177.02(1):

Except as otherwise provided in this chapter, all intangible property, including any income or increment derived from it, less any lawful charges, that is held, issued or owing in the ordinary course of a holder's business and that has remained unclaimed by the owner for more than 5 yearsafter it became payable or distributable is presumed abandoned.

Therefore, funds abandoned or unclaimed in a trust account will normally go to the Department of Revenue. The OLR provides helpful guidance on unclaimed funds on the Wisconsin Court System website regarding the circumstances in which the Unclaimed Property Office will take possession of such funds:

Escheatment of Funds Held in Trust: Pursuant to Wis. Stat. section 177.03, there are a number of circumstances under which funds held in trust by a lawyer or law firm may have to escheat to the State of Wisconsin. These include the following:

1. the lawyer’s or law firm’s records reflect that the last-known address for the apparent owner is in Wisconsin;

2. the lawyer’s or law firm’s records do not reflect the identity of the person entitled to the property, and it is established that the last-known address of the person entitled to the property is in this state;

3. the lawyer’s or law firm’s records do not reflect the last-known address of the apparent owner; and it is established that the last-known address of the person entitled to the property is in Wisconsin; and

4. the transaction out of which the property arose occurred in this state and the last-known address of the apparent owner or other person entitled to the property is either unknown or in a state that does not provide for escheatment of unclaimed property

Before contacting the Unclaimed Property Office, the lawyer should make reasonable efforts to locate the owner of the funds.

It should also be noted that the OLR takes the position that a lawyer generally may not charge for attempts to locate the owner, because delivering funds held in trust to the owner of such funds is a professional obligation of the lawyer – see SCR 20:1.15(e).

Therefore, while to disciplinary rules do not address this situation, whenever a lawyer cannot locate or identify the owner of funds held in trust, the lawyer should contact the Department of Revenue at (608) 266‑2776.