Ethics Corner – When is Depositing Funds into Client Trust Account Required?

New California Rule of Professional Conduct 1.15 requires that “all funds ‘including advances for fees, costs and expenses,’” received by the lawyer from the client or on behalf of the client must be deposited into a client trust account IF the atty “owes a contractual, statutory, or other legal duty” to the client.

In English you say?  If it’s the client’s money it has to go into the client trust account with two exceptions set forth below.  It is the attorney’s money if he sends the client a bill and the client pays it.  If the attorney gets money for work TO BE DONE, it’s the client’s money and must be deposited into the client trust account  – see exceptions below.

Exception 1 – a flat fee.  BUT, the atty must -in writing – tell the client that he can require that the money be put into the trust account AND that the client is entitled to refund if the work isn’t done.  IF the the flat fee exceeds $1,000, the client must sign the “writing.”

Exception 2 – a “true retainer.”  Per Rule 1.5(d), “A true retainer is a fee that a client pays to a lawyer to ensure the lawyer’s availability to the client during a specified period or on a specified matter, but not to any extent as compensation for legal services performed or to be performed.”  Once paid, the money no longer belongs to the client and doesn’t need to be deposited into the trust account.

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