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.
 Dean
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.
Wisconsin
Lawyer
