Frequently Asked Questions
What is the minimum account balance required to maintain a trust account?
The Florida Bar does not require a minimum balance on your Trust account. That is something that your bank may require.
At the end of thefirst paragraph of Chapter 5-1 of the Rules, there is authorization for the firm to maintain a small amount of firm money in the trust account to cover administrative fees charged by the bank to the account. From that “Firm Admin Money” ledger you would pay service charges, check printing costs, wire transfer fees, etc, (i.e. those fees the firm must pay) if the bank charged these to the IOTA account. If you did not have firm money in the account and a charge was made by the bank to the Trust, you would be “using other people’s money” to pay that charge which would be a violation.
The rule does notdefine how much is “a small amount of firm money.”
Participation by the bank in the IOTA program is voluntary, and neither the Florida BarFoundation nor The Florida Bar has any leverage over bank policies.
If you areunhappy with a minimum balance requirement or service charge against your IOTA,then you may want to talk directly with the local bank manager to see if thosecan be waived, or shop around for a more accommodating bank.
If you do close your IOTA trust account, please call the Florida Bar Foundation (800) 541-2195 and report the closing to the IOTA Operations Manager.
May I keep the copies of cancelled trust account checks?
Rule 5-1.2(b)(3), Rules Regulating The Florida Bar, allows attorneys to maintain copies of canceled checks rather than the originals. Most banks now return copies of canceled checks in the monthly bank statements, but generally provide copies of only the front side of the checks. To comply with the requirement, the copy must include both the front and the back of the check.
To maintain a copy of the front-side only does not satisfy this requirement because front-side only copies exclude endorsements and bank clearing stamps that are placed on the back of the checks.
Endorsements and bank clearing stamps are important portions of the check that establish that the proper payee actually received the intended distribution of trust account funds. Attorneys should request that their bank provide a copy of both sides of their trust account canceled checks in order to meet the minimum trust account record requirements.
Must all client funds be held in an IOTA account?
An attorney should only place funds that are either nominal or short-term into an IOTA account. Rule 5-1.1 (g)(2), Rules Regulating The Florida Bar states:
(2) Required Participation. All nominal or short-term funds belonging to clients or third persons that are placed in trust with any member of The Florida Bar practicing law from an office or other business location within the state of Florida shall be deposited into one or more IOTA accounts, unless the funds may earn income for the client or third person in excess of the costs incurred to secure the income, except as provided elsewhere in this chapter. Only trust funds that are nominal or short-term shall be deposited into an IOTA account. The member shall certify annually, in writing, that the member is in compliance with, or is exempt from, the provisions of this rule.
(3) Determination of Nominal or Short-Term Funds. The lawyer shall exercise good faith judgment in determining upon receipt whether the funds of a client or third person are nominal or short term. In the exercise of this good faith judgment, the lawyer shall consider such factors as:
(A) the amount of a client’s or third person’s funds to be held by the lawyer or law firm;
(B) the period of time such funds are expected to be held;
(C) the likelihood of delay in the relevant transaction(s) or proceeding(s);
(D) the cost to the lawyer or law firm of establishing and maintaining an interest-bearing account or other appropriate investment for the benefit of the client or third person; and
(E) minimum balance requirements and/or service charges or fees imposed by the eligible institution.
The determination of whether a client’s or third person’s funds are nominal or short term shall rest in the sound judgment of the lawyer or law firm. No lawyer shall be charged with ethical impropriety or other breach of professional conduct based on the exercise of such good faith judgment.
If an attorney determines that the funds are not nominal or short-term, then the funds must be deposited into an interest-bearing account and all interest must go to the benefit of the client.
What should an attorney do with client funds presently held in the attorney’s trust account because attempts to contact the former client have been unsuccessful?
Proper handling of funds held in trust for a missing owner is addressed in Rule 5-1.1(i) of the Rules Regulating The Florida Bar. This rule provides:
(i)Unidentifiable Trust Fund Accumulations and Trust Funds Held for Missing Owners. When an attorney’s trust account contains an unidentifiable accumulation of trust funds or property, or trust funds or property held for missing owners, such funds or property shall be so designated. Diligent search and inquiry shall then be made by the attorney to determine the beneficial owner of any unidentifiable accumulation or the address of any missing owner. If the beneficial owner of an unidentified accumulation is determined, the funds shall be properly identified as the lawyer’s trust property. If a missing beneficial owner is located, the trust funds or property shall be paid over or delivered to the beneficial owner if the owner is then entitled to receive the same. Trust funds and property that remain unidentifiable and funds or property that are held for missing owners after being designated as such shall, after diligent search and inquiry fail to identify the beneficial owner or owner’s address, be disposed of as provided in applicable Florida law.
This rule requires that the funds in question be designated on the attorney’s trust account records as being held for a missing owner, that the attorney make a diligent attempt to contact the clients, and that, if the attorney is unable to contact the clients, the funds be disposed of pursuant to applicable law. For information regarding reporting unclaimed funds contact The Florida Department of Financial Services Bureau of Unclaimed Property at (850) 413-5555.
I have recently decided to start charging clients a flat rate for some of the legal services I provide. Some of the services will require a payment for costs. In order to keep things simple I wish to include the amount for costs in the flat rate that I charge. Do I have to place the funds in my trust account?
According to Florida Ethics Opinion 93-2 “advances for costs and expenses must be deposited in the attorney’s trust account and withdrawn and applied against such expenses as they are incurred and paid.”
The opinion states that a “flat fee’ which includes costs:
….should be first deposited in the trust account. Then that portion, if any, of the payment that is considered an earned fee upon receipt should promptly be withdrawn from the trust account. Any portion that does not constitute earned fees must remain in the trust account.
The fact that costs are to be paid out of this “flat fee” complicates matters somewhat. As required by Rules 4-1.15(a) and 5-1.1(a), any advance of costs is to be held in trust until used to pay those costs. Therefore, the attorney must make a good faith estimate of the amount of costs to be incurred and must hold that amount in the trust account. Failure to hold the estimated costs in the trust account would result in the attorney paying the costs out of his or her own funds, which would violate Rule 4-1.8(e) (lawyer may not provide financial assistance to client, except to advance costs and expenses). Not holding the estimated costs in the trust account would also result in a commingling violation under Rule 4-1.15(a) when those funds, which should have been left in trust, are removed and commingled with the attorney’s own funds.
To summarize, a fee paid to the firm that is understood to be earned upon receipt must be placed in the operating account. If money for costs is part of a prepaid lump sum that includes a fee that is deemed earned when paid, then the entire amount must be placed in trust and the earned fee portion promptly withdrawn. If money for costs is part of a prepaid lump sum that includes an advance deposit against fees to be drawn as the services are performed, then the entire amount must be deposited in the trust account, and the fees must be withdrawn within a reasonable amount of time after they are earned. The costs must be disbursed as they are incurred.
Trust Accounting News
- Attorneys should verify IOTA titling
- Rules now require written trust account plans
- Maintaining a Trustworthy Trust Account
Trust Accounting Resources
Chapter 5, Trust Accounting, The Rules Regulating The Florida Bar
Forms to Open an IOTA Account
- Notice to Bar Foundation Form (Complete Online ) (Print PDF)
- Notice to Eligible Institution Form (Complete Online ) (Print PDF)
- Sample Trust Account Bank Notification Letter