Nov. 20, 2019 – Is it permissible to send funds from my trust account to my client by wire transfer?

Question

I’ve handled personal injury actions for years and have always handled settlements the same way. I review the settlement statement with the client, make sure all third-party liens are satisfied and issue a check to the client. Now I have a client who is out of state for the winter and wants the settlement funds sent to them by wire transfer. I always thought that the only permissible way to withdraw funds from a trust account was by check.

Is it permissible to send funds from my trust account to my client by wire transfer?

Answer

Most lawyers are aware that deposits to and withdrawals from lawyers’ trust account are subject to regulation, and most lawyers are aware that Wisconsin’s trust account rule, SCR 20:1.15, is long and complicated. So it is not surprising that there is confusion about what is and is not permitted.

SCR 20:1.15(f)(2) “Prohibited Transactions” states, in relevant part:

a. Cash. No withdrawal of cash shall be made from a trust account or from a deposit to a trust account. No check shall be made payable to "Cash." No withdrawal shall be made from a trust account by automated teller or cash dispensing machine.

b. Telephone transfers. 1. Except as provided in SCR 20:1.15(f)(2)b.2., no deposits or disbursements shall be made to or from a pooled trust account by a telephone transfer of funds.

2. Wire transfers may be initiated by telephone, and telephone transfers may be made between non-pooled trust accounts that a lawyer maintains for a particular client.

c. Electronic transfers by 3rd parties. A lawyer shall not authorize a 3rd party to electronically withdraw funds from a trust account. A lawyer shall not authorize a 3rd party to deposit funds into the lawyer's trust account through a form of electronic deposit that allows the 3rd party making the deposit to withdraw the funds without the permission of the lawyer.

(3) Electronic transactions. A lawyer shall not make deposits to or disbursements from a trust account by way of an electronic transaction, except as provided in SCR 20:1.15(f)(3)a. through c.

(emphasis added)

A previous version of the rule was a bit clearer,¹ but this is the only mention of wire transfers in the rule or its comment. So, based upon a reading of the rule, one must deduce from the fact that it is not among the listed prohibited transactions that wire transfers are not prohibited.

In fact, wire transfers have long been permitted into and out of standard IOLTA trust accounts. “Electronic transactions,” as defined by SCR 20:1.15(a)(2), are prohibited for standard IOLTA trust accounts by SCR 20:1.15(f)(3), and it may be the case that lawyers incorrectly believe that wire transfers are included on the ban on electronic transactions.²

Whether from lack of explicit permission in the rule or confusion about “electronic transactions,” many lawyers are unclear as to whether they may initiate wire transfers from standard trust accounts, but they are permitted by the trust account rule.

Endnotes

¹ The prior SCR 20:1.15(e)(4) explicitly stated that the section of the rule did not prohibit wire transfers.

² Electronic transactions are permitted for “e-banking” trust accounts, provided all the requirements of SCR 20:1.15(f)(3)b are met, and are also permitted for “alternative to e-banking” (also known as “all-in-one”) trust accounts, provided that all the requirements of SCR 20:1.15(f)(3)c are met.