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How secure is a lawyers trust account?

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STEPHAN

Senior Member
What is the name of your state? FL

As part of a real estate deal, I have to pay a bigger amount on a Lawyers Trust Acct at US Bank. This person is a lawyer in IA and CPA in IA and FL.

How secure is the money in such an account?

What happens if the Lawer/CPA or someone at his office embezzles the money?

Thanks for your help!
 


quincy

Senior Member
What is the name of your state? FL

As part of a real estate deal, I have to pay a bigger amount on a Lawyers Trust Acct at US Bank. This person is a lawyer in IA and CPA in IA and FL.

How secure is the money in such an account?

What happens if the Lawer/CPA or someone at his office embezzles the money?

Thanks for your help!
Funds deposited in a lawyer’s trust account are as secure as funds deposited in any trust account. Embezzlement would be rare.

Here are links to articles on lawyers trust accounts, published in The National Law Review:

https://www.natlawreview.com/article/managing-attorney-trust-account-best-practices-more

https://www.natlawreview.com/article/trust-accounting-guide-lawyers

Choose a reputable attorney and your money should be safe. Most attorneys place a great deal of value on their law licenses. Failure to maintain a trust account and protect a client’s money properly could be grounds for disbarment.
 
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quincy

Senior Member
If you have questions about the attorney trust account and your attorney’s billing and disbursement process, STEPHAN, your attorney should be able to tell you exactly how your money is handled. I would discuss any concerns with him/her.
 

STEPHAN

Senior Member
Part of my real estate license is a state fund that potentially handles any issues with my escrow accounts in case I embezzle funds. I was hoping it would be the same with lawyers. That lawyer is extremely good, but he is 82 years. What if he passes?
 

Taxing Matters

Overtaxed Member
How secure is the money in such an account?
A lawyer's trust fund account is an account separate from any business banking account that the lawyer has. It may be one account that holds the trust funds for all clients or the lawyer may set up a separate trust fund for each client. The accounts are designated as trust fund accounts with the bank which means that if the lawyer has financial problems (e.g. judgment from a creditor, IRS liens, etc) and the creditor hits the lawyer's bank with a garnishment/levy order, those orders will not touch the trust fund accounts. The funds in the trust fund account do not belong to the attorney until the attorney has earned the fee to charge to the client. That also means that the trust fund accounts would not go to creditors of the lawyer in a bankruptcy; they'd get returned to the clients. Lawyers may be (and have been) disbarred for misusing client trust fund monies, and trust fund debts are generally NOT dischargeable in bankruptcy. So if the lawyer misuses the trust fund money, he or she cannot escape that debt via bankruptcy. Any really good attorney takes great care not to mess up the trust fund accounts. That's one of the surest ways to get suspended or disbarred and run into a real financial mess.

Part of my real estate license is a state fund that potentially handles any issues with my escrow accounts in case I embezzle funds. I was hoping it would be the same with lawyers.
That depends on the state. Most states do have funds that lawyer registration fees support that provides money to help pay a client whose lawyer misused the client's money. The jurisdictions in which I practice do that, but I don't know about Florida specifically. Lawyer malpractice insurance also would typically cover that kind of malfeasance, too.

That lawyer is extremely good, but he is 82 years. What if he passes?
Is he a solo practitioner or is he a member/partner/employee of a law firm? If he's practicing in a firm with other lawyers and he dies, the other lawyers in the firm will take responsibility for resolving both who will represent you going forward and how to handle your trust fund balance. IN my state the firm would have to give you a choice of staying with that firm or changing to some other lawyer of your choice, and should you do the latter the present law firm must help facilitate transfer of client records, trust fund accounts, etc. If he's a solo practitioner then you'd have to hire a new lawyer to continue the matter, and that lawyer should contact the executor/personal representative of the estate to get the necessary files and transfer of trust funds done. Either way, there will be some disruption of events as would occur when any professional dies while he or she has work in progress.

Some lawyers die in their 20s, some still practice well into their 90s. While at IRS I attended the retirement gathering for an estate and gift tax lawyer who had shortly before turned 100 years old and decided he was ready to retire. He had started with IRS when the first federal estate and gift taxes were imposed post 1913 (when the Constitution was amended to allow for an income tax — the gift and estate taxes were soon deemed necessary as a backstop to the income tax). This attorney was still very sharp, and since he'd been working estate and gift taxes since the start of those taxes, he knew more about the development of those taxes and how they were meant to work than anyone else at the time. I'd be lucky indeed to be still in good enough state to practice at 100. All this to say the following: don't let the lawyer's older age alone dissuade you from hiring him or her. Rather, that age can be an asset. The oldest (and founding member) of the firm I'm associated with is about to turn 80 and is still recognized as among the best in the state at the work he does. He may walk a bit slower than he did and have less energy than in decades past, but is still as good as ever in a courtroom. An old saying goes that one should pick "young doctors and old lawyers." :D I won't delve into the assumptions that went into that saying, except to say that in our very technological age that saying may not be as useful as it once was for either profession. It's not age you're looking for so much, but ability.
 

quincy

Senior Member
Part of my real estate license is a state fund that potentially handles any issues with my escrow accounts in case I embezzle funds. I was hoping it would be the same with lawyers. That lawyer is extremely good, but he is 82 years. What if he passes?
All Florida Bar members who practice law in Florida must, under Florida Rules, designate another lawyer as their “inventory lawyer.” The inventory lawyer notifies clients of their attorney’s death, and is charged with returning the client files to the clients and distributing all of the client funds held in the deceased attorney’s trust accounts.

Here is an additional link to Chapter 5 of the Florida Bar Rules on Regulating Trust Accounts:
https://www-media.floridabar.org/uploads/2018/10/Ch-5-2019_04-Oct-12-2018-RRTFB.pdf

It sounds as if you do not have a lot of trust in your current attorney. Is there a reason, besides age, that is driving this distrust? You always have the option of hiring a different attorney to handle your real estate matters, keeping in mind that you will still be responsible for paying your current attorney for the services already rendered on your behalf.
 

Taxing Matters

Overtaxed Member
All Florida Bar members who practice law in Florida must, under Florida Rules, designate another lawyer as their “inventory lawyer.” The inventory lawyer notifies clients of their attorney’s death, and is charged with returning the client files to the clients and distributing all of the client funds held in the deceased attorney’s trust accounts.
That's something I'd not heard before. It's an interesting way of dealing with the issue. There are probably other effective things state bars could do on this issue. But as nobody likes to think about dying, it doesn't seem like a topic they are eager to delve into.

It sounds as if you do not have a lot of trust in your current attorney. Is there a reason, besides age, that is driving this distrust? You always have the option of hiring a different attorney to handle your real estate matters, keeping in mind that you will still be responsible for paying your current attorney for the services already rendered on your behalf.
I agree with quincy on this. But take a little time to think about it and what it is that truly bothers you so you know what to avoid if you go out interviewing for a new lawyer. In the end, you want a lawyer you feel confident will do a good job for you. That may mean interviewing several lawyers to find a good fit.
 

STEPHAN

Senior Member
Thank you for all your input! Yes, I absolutely want to work with him, just making sure I don't do anything stupid.
 

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