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Vol. 73, No. 6, June 2000 |
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.
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