Also known as: trust funds · trust-fund · trust account
Written by attorneys · grounded in primary & secondary sources — see below
A segregated account maintained by a lawyer to hold money or property belonging to clients or third parties. The account must remain separate from the lawyer's own funds. Advance fees and expenses must be deposited into the account and withdrawn only as earned or incurred. A lawyer may add personal funds solely to cover bank service charges and only in the amount necessary for that purpose.
Theresa Tucker maintains a client trust account for Tara Tran. When the bank notifies Tucker of an impending service charge, she deposits exactly twenty dollars of her own money into the account. The deposit covers only the charge and leaves all client funds untouched.
Tyler Taylor receives a settlement check for client Travis Tate and deposits it into the trust account. Taylor then withdraws twenty thousand dollars to pay personal debts, knowing the money belongs to Tate. The knowing removal triggers automatic disbarment proceedings.
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Tabitha Taylor receives a fifty thousand dollar retainer from Talon Security before beginning work. She deposits the entire sum into the client trust account. Taylor withdraws portions only after completing each billed task and incurring corresponding expenses.
Lillian Pritchard serves as a director of a reinsurance intermediary that holds client premiums in trust. She fails to monitor officers who divert the funds for personal use. The court holds her personally liable for the resulting losses to the trust fund beneficiaries.
The Affiliated Ute Citizens organization holds a trust fund created from a federal judgment for tribal members. The court determines that only the Ute Development Corporation, not the Citizens group, may manage the oil and gas rights financed by that fund.
James O'Hagan embezzles client trust funds and uses the proceeds to hide profits from illegal securities trades. The indictment charges him with mail fraud and securities violations arising directly from the trust fund conversion.
A lawyer must deposit advance fees and expenses into a client trust account. The lawyer may withdraw the funds only as fees are earned or expenses are incurred.
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A lawyer may deposit personal funds only to pay bank service charges on the account and only in the exact amount needed for that purpose.
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Knowing misappropriation of client trust funds results in disbarment. The penalty applies regardless of any intent to repay, absence of client loss, or the lawyer's prior record.
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Separation prevents commingling that could expose client funds to the lawyer's creditors or create confusion over ownership. The rule also preserves public confidence in the legal profession.
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…O'Hagan used the profits he gained through this trading to conceal his previous embezzlement and conversion of unrelated client trust funds. O'Hagan was charged with 20 counts of mail fraud, in violation of 18 U. S. C. § 1341; 17 counts of securities fraud, in violation of § 10(b) of the Securities Exchange Act of 1934…