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    Wisconsin Lawyer
    June 01, 2000

    Wisconsin Lawyer June 2000: Practice Tips

    Practice Tips

    Attorneys Must Disclose Existence of Funds Held in Fiduciary Capacity

    As broadly interpreted, attorneys must disclose the existence of funds held by the attorney in any fiduciary capacity, even if not in a representation capacity. Trust account certification is due June 30, 2000.

    by Dean R. Dietrich

    I serve as guardian for my father-in-law and have exclusive control over his assets, including a checking account. Am I required to disclose the existence of the checking account that I use to pay his bills and require the bank where the account is located to issue an overdraft notification to the Board of Attorneys Professional Responsibility (BAPR)?

    Answer

    Under a broad interpretation of the language in SCR 20:1.15, you are required to disclose the existence of that checking account on your trust account certification that is submitted with the State Bar dues and require the bank to issue an overdraft notice to BAPR if an overdraft occurs. The Wisconsin Supreme Court recently amended SCR 20:1.15, entitled "Safekeeping Property," to require banks or other financial institutions where lawyer trust accounts are located to issue an overdraft notification notice to BAPR if an overdraft occurs on a lawyer's trust account. As part of that rule change, SCR 20:1.15(a) was significantly changed. The rule now provides, in relevant part:

    "A lawyer shall hold in trust, separate from the lawyer's own property, that property of clients and third persons that is in the lawyer's possession in connection with a representation or when acting in a fiduciary capacity. Funds held in connection with a representation or in a fiduciary capacity include funds held as trustee, agent, guardian, personal representative of an estate, or otherwise."

    Under this language, the rule not only applies to funds given to a lawyer during the course of legal representation, but to funds given to a lawyer or funds that the lawyer has exclusive control over while serving in a fiduciary capacity. This would include instances where the lawyer serves as agent, trustee, or personal representative of an estate but not in a lawyer capacity.

    The new language is not limited to instances where the lawyer serves in the fiduciary capacity as part of his or her legal representation or retainer for legal services, but rather applies to all instances where the lawyer serves in a fiduciary capacity. As a result, the safekeeping rules apply to instances where a lawyer is legal guardian for a family member or is personal representative for a family member's estate even though the attorney is not retained as counsel or being compensated as an attorney for serving in that capacity. This language, if interpreted broadly, also applies to instances where a lawyer is serving as trustee or agent for funds held in trust for a son or daughter, such as a college fund or a uniform gift to minors trust account. This rule also would likely apply to any instance where the attorney has the exclusive authority to distribute funds or authorize issuance of checks from an account where the attorney serves as agent or trustee for the account.

    Because the language is so broad, efforts have been undertaken to attempt to clarify the language both through interpretation and possibly through further rule amendments. At present, BAPR staff have indicated that it would not consider this rule to apply to those demand accounts where the attorney and others are listed as authorized signators or agents and each has the right to issue checks or release funds from the account. BAPR staff also have made it clear that the requirements of this rule, especially the overdraft notice requirements, only apply to demand-type accounts where checks or other instruments may be used to withdraw monies from the account but not to pure custodial accounts where funds are simply held in trust and not available for routine distribution.

    Lawyers also must certify to the existence of trust accounts when completing their State Bar dues forms in order to comply with SCR 20:1.15(c). (The dues statement was mailed in early June.)

    There is confusion as to whether the trust account certification applies to the myriad of fiduciary accounts that may exist in which the lawyer serves in a fiduciary capacity. The language of SCR 20:1.15(c) regarding the trust account certification requirement and SCR 20:1.15(p) regarding the overdraft notification requirement appear to speak only to lawyer trust accounts or accounts maintained in connection with the practice of law. While this technical reading would appear to exclude those accounts in which the lawyer serves in a fiduciary capacity from the certification and overdraft notice requirement, to date, BAPR has relied upon the apparent intent in changing the language of SCR 20:1.15(a) to conclude that the certification and overdraft notice requirements also apply to these accounts in which the lawyer serves in a fiduciary capacity, even if not in a representative capacity. Again, efforts are being made to clarify the exact obligations of a lawyer with regard to the trust account certification and overdraft notification language.

    DietrichDean R. Dietrich, Marquette 1977, of the Wausau firm of Ruder, Ware & Michler L.L.S.C., is a member of the State Bar Professional Ethics Committee.

    BAPR staff have indicated that they will not pursue trust account rules violations unless a concern or complaint is brought to its attention about the handling of money or there is an overdraft of the account. For example, BAPR likely would not pursue issues of trust account certification or overdraft notification as part of an investigation in a nontrust account complaint proceeding (for example, conflict of interest complaint.)

    Lawyers are cautioned, however, to consider the broad language of SCR 20:1.15(a) when completing the trust account certification that is submitted with the State Bar dues. Questions regarding the interpretation of this rule should be directed to BAPR. Trust account certifications must be filed by June 30, 2000.


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