Trust Accounting Questions and Answers with the Experts

At the CBA’s recent 2 hour CLE program “Everything You Need To Know About Trust Accounting” (now available to watch on demand) we had so many questions for our panelists that they didn’t have time to answer them all. However, our intrepid experts – Dan Cotter, David Holterman and Mary Andreoni – took the time to respond to some of the attendee’s questions below. Please note: The responses expressed here are solely those of the individual panelists. They are provided as only general input and should not be considered advisory opinions regarding any specific factual scenarios.

Q: If you work as a  Guardian Ad Litem & receive money before you perform your duties, does that money need to be in an IOLTA account since you really don’t represent a client?

A: [Mary Andreoni] If the “GAL” does not represent a client,  ILRPC 1.15 is not triggered and the  money in question does not go into an IOLTA  account.

Q: Scenario: – Lawyer/Lawfirm is holding Settlement proceeds in IOLTA account. – Client can’t be located despite reasonable efforts made. – There is a clear, signed, contingent fee agreement setting forth lawyer’s percentage of fee to be earned for services rendered. Question: Can a lawyer/lawfirm take its portion of the proceeds pursuant to the signed fee agreement and leave the remainder of client’s proceeds in the IOLTA account?

A: [Mary Andreoni] No.  The law firm can withdraw its fees if the client specifically authorized the law firm to withdraw its contingent fee from the settlement proceeds before the client disappeared. See, In re Walner, 519 N.E.2d at 908, and ISBA Opinion Nos. 95-11 (Jan. 1996) and 88-4 (Feb. 1989).  Without the client’s authority to the settlement distributions, the law firm must maintain the settlement proceeds in the IOLTA account until authority is obtained from either the client or elsewhere (e.g., court).  See ISBA Op. 02-02 (Nov. 2002).

Q: Do you need to maintain an IOLTA account for ARDC purposes (it’s part of annual registration) if you are not holding client funds?

A: [Mary Andreoni] No.  Supreme Court Rule 756(d) requires all Illinois lawyers to disclose whether they or their law firm maintained a trust account during the preceding year and to disclose whether the trust account was an IOLTA (Interest on Lawyer Trust Account) trust account, as defined in ILRPC 1.15(f) of the Rules of Professional Conduct. If a lawyer did not maintain a trust account, the lawyer is required to disclose why no trust account was maintained.

A: [David Holterman] I agree.  Rule 1.15 and its specific requirements to hold funds in an IOLTA or other client trust account are “triggered” when a lawyer comes to possess funds of a client or third person in connection with a representation. (See paragraph a.)

Q: How would you handle an emergency matter (e.g., an Order of Protection) where the client retains you and asks you to file a case (for which the client must incur costs) on the same day, before the retainer check is able to clear?

A: [Mary Andreoni]  The lawyer may pay the expense on behalf of the client, which is permitted under ILRPC 1.8(e)(1), and deposit the client’s check into the lawyer’s business account as reimbursement for the lawyer’s advance.

A: [David Holterman] If the check is only for court costs and/or a flat fee charged by the lawyer, I agree it can be deposited in the lawyer’s business account. If the client’s check includes any additional amounts – e.g. for a security retainer – then the check should be deposited in the IOLTA account with the appropriate amounts withdrawn by the lawyer for reimbursement.

Q: Is it permissible to state in one’s Client Engagement Letter that the attorney may withdraw funds from the security retainer account as the work is performed, and then send a statement at the end of the month? Must a statement actually be sent each time a withdrawal is to be made to give the client an opportunity to say “NO” even if it’s agreed up front that the lawyer may withdraw funds as and when earned?

 A: [Dan Cotter] Yes, it is permissible.  While a statement is not required by the rules, it is best practices to stay in communications with the client.  One of the biggest reasons for complaints against attorneys is lack of communication.  The invoice or notice of work done for withdrawal is an opportunity to communicate with the client and keep the client informed of where the case or matter is at.

 Q: Can the client advance a retainer for tax benefit (deductability)?

 A: [Mary Andreoni] No. The client’s desire to minimize the client’s tax obligations is not an appropriate use of an advance payment retainer. Advances covered by ILRPC 1.15 are funds received by a lawyer in connection with the payment of legal fees and expenses of the representation.  An advance payment retainer must meet the requirements of ILRCP 1.5(c).  The requirements of Rule 1.15(c) must be read in conjunction with the Dowling case.  As such, an advance payment retainer must be used sparingly and only where it is in the client’s interest as it relates to the client’s responsibility to pay the lawyer’s fees and expenses.

A: [David Holterman] In addition to Dowling, Comments [3A] – [3D] to Rule 1.15 are useful for understanding the requirements of paragraph (c).

 Q: What does a sole practitioner do about succession/access to Iolta funds after incapacity or death?

A: [Catherine Sanders Reach] There is guidance from the IARDC for succession planning and your IOLTA funds in The Basic Steps to Ethically Closing a Law Practice, from the Michigan Bar Association’s guide “Planning Ahead: A Guide to Protecting Your Clients’ Interests in the Event of Your Disability or Death” and in the Chicago Bar Association CLE program “Succession Planning to Cover Bumps in the Road 

Q: If you charge a fixed fee but the fee does not include a government fee and the client pays it separately and provides it to the attorney so that it can be included with the file that the attorney will mail to the government institution, does the government fee have to go in an IOLTA account?

 A: [Dan Cotter] I don’t believe so.  If the check is made payable to the government, then the fees do not appear from this scenario to be entrusted to the attorney as fiduciary.

A: [David Holterman] I agree that a separate check made payable to the government entity can be passed on to the entity. If it is a separate check payable to the attorney, then it should be processed through the IOLTA account.

Q: If I represent a client who resides or works in another state, and I hold funds for him/her in a trust account, am I subject to trust accounting rules of the client’s home state? Do the rules of one state or the other govern in the event of a conflict?

 A: [Mary Andreoni] You should follow the rules of the jurisdictions in which you open the trust account.  To the extent there are any inconsistencies between the rules of one state and the lawyer’s licensing jurisdiction, those inconsistencies should be resolved by reference to ILRPC 8.5(b).

 A: [David Holterman] Under the framework of Rule 1.15, the client trust account requirement follows the lawyer, not the client. Paragraph a states that funds should be deposited in a client trust account “maintained at an eligible financial institution in the state where the lawyer’s office is situated, or elsewhere with the informed consent of the client.” If the client trust account is maintained in the client’s state, the lawyer must follow the trust account/IOLTA requirements of that state.

Thanks to our panelists for being so generous with their time and knowledge!

Know What You Are Sending (With A Little Help) in MS Word

Microsoft can warn you  before sending, saving or printing a document with comments or tracked changes

Microsoft can warn you before sending, saving or printing a document with comments or tracked changes

Eighteen jurisdictions have ethics opinions on metadata.  All of them suggest that a lawyer who is sending an electronic document should take reasonable precautions to prevent disclosure of confidential information. While technically not metadata, the comments and tracked changes in a Microsoft Word document do present a significant opportunity to unintentionally expose  confidential information.  There are many ways to remove and reduce exposure of metadata, but one very important aspect is that the sender is aware of what is being sent. In some cases you may fully intend to send a document with comments and tracked changes.

Whether intentional or not, a notification that a document you are saving, sending, or printing has tracked changes or comments could be useful.  Fortunately you can do exactly that with a setting in MS Word.  In Word 2010-13 go to File – Options – Trust Center – Trust Center Settings – Privacy Options and check the box that says “Warn before printing, saving, or sending a file that contains tracked changes or comments”.

Once this option is checked if you click to save or save as, print to a physical printer or to PDF,  save to PDF or use a PDF conversion tool like Acrobat or Nuance, or use any command under the “Save and Send” menu you will get a warning that the document has either comments and/or tracked changes and asks you to click yes to continue.  However, the warning system is fallible because if you attach the file from an email program, such as MS Outlook you will get no notice.

Disaster Planning: Turn Off Email Address Autocomplete

February LPMT Tech Tip

Headline after headline after headline reveal attorneys suffering disaster because of mis-sending email. While slowing down and paying more attention can help, turning off some of the convenience features built into email applications can’t hurt. In MS Outlook (2010 & 2013) go to File – Options – Mail – Send Messages and uncheck “Use Auto-Complete List to Suggest Names when Typing in the To, CC, and BCC Lines”.






Then click on “Empty Auto Complete List”.

autocomplete button





If that seems a bit too nuclear you can selectively remove old or easy to abuse AutoComplete email addresses that appear in email by clicking on the X next to the name that appears. This will clear it from your auto-complete list.removefromlist






If you use keyboard shortcuts like <Cntrl + Enter> to send an email you can turn it off. Why? Because this method  is so quick that it can be dangerous! You can turn off that shortcut by unchecking the option box, which appears in the same options menu as turning off AutoComplete. Now you won’t be able to create a disaster in the blink of an eye.






For Gmail you must delete individual contacts for them not to show up in AutoComplete, though you can go to Settings and choose to add contacts youself instead of the default “When I send a message to a new person, add them to Other Contacts so that I can auto-complete to them next time”.



There are other remedies for common mistakes like the “Reply All” monitor from Sperry for MS Outlook or Google’s “Undo” option in Labs (which can also be done in MS Outlook and is actually just putting a short delay on the “send” time). However, the main way to having embarrassing, costly or worse things happen from misuse of email is just to slow down on the send button.


How to Securely Use Dropbox in a Legal Environment

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Email Encryption For Everyone

The recent confirmation that the US government, through the NSA’s PRISM surveillance, collects massive amounts of electronic data is really only the tip of the iceburg when viewed in light of all of the potential exposure email has to unauthorized access. From hackers to governments to law enforcement to targeted espionage to identity thieves, there are many who may want to access and view your email and its attachments.

Depending on the type of client you represent and the work you do unencrypted email exchange may not provide enough protection for confidential communication. The ABA’s formal opinion from 1999 on email encryption (99-413) generally allows for use of email to communicate with clients, but also provides the caveat that “when the lawyer reasonably believes that confidential client information being transmitted is so highly sensitive that extraordinary measures to protect the transmission are warranted, the lawyer should consult the client as to whether another mode of transmission is, such as special messenger delivery, is warranted..”

Much has changed since 1999. Commentary in the opinion states: “[t]he Committee believes that e-mail communications, including those sent unencrypted over the Internet, pose no greater risk of interception or disclosure than other modes of communication commonly relied upon as having a reasonable expectation of privacy. The level of legal protection accorded e-mail transmissions, like that accorded other modes of electronic communication, also supports the reasonableness of an expectation of privacy for unencrypted e-mail transmissions. ” Read in light of the known, legal interception of email transmission by the government and the increased use of webmail services that offer free service in exchange for access to the text of the email is it still reasonable to rely on an expectation of privacy and legal protection of email transmissions?

There are a variety of ways to encrypt email communications. For large firms working with corporate clients, firms representing governments, lawyers representing political prisoners and other circumstances may require an end to end encryption solution such as PGP to be set up and used by both parties. Once in place the process is relatively seamless. Lifehacker provides a great guide on end to end encryption for email clients and webmail..

However, lawyers who work with consumer clients including estate planning, family law, bankruptcy, criminal, real estate, civil rights etc. may not have a long term relationship with their clients or have the level of sensitivity in the communication that warrants a long term encryption key exchange. For those situations attorneys can still encrypt email on a short term or case by case basis by using some of the “on demand” email encryption options available. These tools are often free for limited use and while they do not provide the level of protection afforded by traditional email encryption they do provide some peace of mind. The article Easy Encryption for Email is Not an Oxymoron provides information on three such services that employ different models for protection. To see these easy encryption options in action check out the How To… video from the Chicago Bar Association’s LPMT.

Managing LinkedIn Endorsements and Optimizing Your Profile

During Membership Appreciation Week here at the Chicago Bar Association I put on a program on how to optimize your LinkedIn profile. One question that came up was about the new endorsements of your skills and expertise listings. If you are interested in managing that area of your profile take a look at this short video. If you would like to see the entire program it is now online, free for Chicago Bar Association Members.

You may also want to take a look at a recent article from Attorney at Work titled “Should Lawyers Connect with Competitors?” and note the links to other pertinent articles on lawyers’ use of LinkedIn at the end of the article.

Layering Security: Two Factor Authentication

“In the space of one hour, my entire digital life was destroyed. First my Google account was taken over, then deleted. Next my Twitter account was compromised, and used as a platform to broadcast racist and homophobic messages. And worst of all, my AppleID account was broken into, and my hackers used it to remotely erase all of the data on my iPhone, iPad, and MacBook.”

Thus starts the story of Mat Honan, a writer for Wired Magazine. Mat’s story should be a cautionary tale for all, especially lawyers whose duties to maintain the confidentiality of client data extend the need for added security beyond just personal inconvenience.  Mat admits that much of what happened could have been avoided by using two factor authentication on his Google account and other security measures.  So, why didn’t he do it? Because adding layers of security means adding a layer of complication, and sometimes inconvenience. However, to unravel from a firm security breach or hack would be even more inconvenient.

Google’s Gmail, Google Chrome, LastPass, Dropbox, WordPress and many other popular services have added an extra layer of security that a user must enable called “two factor authentication”.  The concept of this security is that a person cannot access another user’s account without something she knows and something she has. In the case of these popular services the solution is a strong password plus a secondary code that is sent via text to a smartphone or mobile device.  Both are required to access the account. For two factor access to laptops there are devices like USB tokens and smart cards that must be plugged in for the machine to boot up. Likewise you can buy external biometric security devices, such as a fingerprint reader, which is a substitution for what the user has to what the user is.

The SANS Institute OUCH! newsletter this month provides further information and links on two factor authentication for popular online services. When enabling two factor authentication make sure to read all the instructions carefully. Matt Cuts blogs for Google on how the two factor authentication works with Gmail, and dispels some myths about any perceived difficulties this may add to accessing your email.

Want to learn more about security best practices for your law firm? Sign up for the CBA CLE (1.5 IL PR Credit)  “Lighting the Corners: Security Best Practices”  in person or webcast on November 20 at 12 CT.

CBA’s Law Firm Start-up Boot Camp is one week away – register today!

Whether you are going solo, opening a small firm, or just need a refresher, the CBA’s new “Law Firm Start Up Boot Camp” is a day long event that will provide essential information on getting a successful law practice up and running.

The program will be held on Thursday, October 4, 2012, from 8:45 a.m. to 5:00 p.m. at the CBA Building, 321 S. Plymouth Ct., Chicago. The program has been approved for 4.25 IL Professional Responsibility Credit and 1.75 IL MCLE Credit.

Our panelists include some of the most experienced practice management advisors in the country: Jim Calloway, J.D., Director, Management Assistance Program at the Oklahoma Bar Association; Natalie Kelly, Director, Law Practice Management Program, State Bar of Georgia; Catherine Sanders Reach, Director, CBA Law Practice Management & Technology Division; and Reid Trautz, J.D., Director, Practice and Professionalism Center, American Immigration Lawyers Association.

The presentation will provide practical and proven guidance to lawyers in various settings to create effective, ethical and efficient solo and small firm practices. In this economy you have to give yourself the best chance for success. Invest in yourself. Invest a day to learn the best practices for your law practice. Invest in your future. Whether you are just starting out or looking to inject new ideas and energy into your existing firm, this is an event you won’t want to miss.

Topics include:

  • Becoming a Law Practice Entrepreneur
  • Budgeting and Financing
  • Building a Client Base
  • Using the Web/Social Media for Practice Development
  • Money Talks
  • All About Clients
  • Managing the Matter
  • Risk Management
  • The Life of the Lawyer

PLUS a networking lunch with the speakers, sponsored by CBA Administrators

Register to attend in person, or online (am and pm sessions are separate registrations) or call 312-554-2056