Formal Opinion 193.
(1996)
Disbursal Accounts

Facts:

As required by RPC1.14(a),1  Lawyer generally maintains client funds in an IOLTA account. When funds held in trust are payable to a client or nonclient, Lawyer simply writes a check on that account to the payee.

Recently, Lawyer has been told that Lawyer can secure free or reduced price services or obtain other benefits if Lawyer will use a non-IOLTA disbursing account in addition to an IOLTA account. Instead of writing a trust account check directly payable to the payee, Lawyer would write a check payable to the disbursing account and would then, in turn, cause a check to be written on that account to the payee. The potential for benefit arises because of the "float" on the disbursing account.

May Lawyer use such a disbursing account?

No.

RPC 1.14(a), which is set forth above, requires that "[a]ll funds. . . shall be deposited in" an IOLTA account.2  RPC 1.14 makes no exception for disbursing accounts, and we see no basis for reading one into the rule as a matter of interpretation. Moreover, the obvious purpose behind the trust account rules — to maximize the degree of protection accorded client funds — is not served by allowing those funds to pass through a disbursing account.3 

 1 RPC 1.14(a) provides:

(a) All funds of clients paid to a lawyer or law firm, including advances for costs and expenses, shall be deposited in one or more identifiable interest-bearing trust accounts maintained as set forth in RPC 1.14(c), and no funds belonging to the lawyer or law firm shall be deposited therein except as follows:

(1) Funds reasonably sufficient to pay bank charges may be deposited therein.

(2) Funds belonging in part to a client and in part presently or potentially to the lawyer or law firm must be deposited therein, but the portion belonging to the lawyer or law firm may be withdrawn when due unless the right of the lawyer or law firm to receive it is disputed by the client, in which event the disputed portion shall not be withdrawn until the dispute is finally resolved.

 2 See also, RPC 1.14(c), which provides in part:

(c) Each trust account referred to in RPC 1.1 4(a) shall be an interest-bearing trust account in any bank, credit union or savings and loan association, selected by a lawyer in the exercise of ordinary prudence, authorized by federal or state law to do business in Washington and insured by the Federal Deposit Insurance Corporation, the National Credit Union Share Insurance Fund, the Washington Credit Union Share Guaranty Association, or the Federal Savings and Loan Insurance Corporation, or which is a "qualified public depository" as defined in RCW 39.58.010(2), which bank, credit union, savings and loan association or qualified public depository has filed an agreement with the Disciplinary Board pursuant to rule 13.4 of the Rules for Lawyer Discipline. Interest-bearing trust funds shall be placed in accounts in which withdrawals or transfers can be made without delay when such funds are required, subject only to any notice period which the depository institution is required to reserve by law or regulation.

(1) A lawyer who receives client funds shall maintain a pooled interest-bearing trust account for deposit of client funds that are nominal in amount or expected to be held for a short period of time. The interest accruing on this account, net of reasonable check and deposit processing charges which shall only include items deposited charge, monthly maintenance fee, per item check charge, and per deposit charge, shall be paid to The Legal Foundation of Washington, as established by the Supreme Court of Washington. All other fees and transaction costs shall be paid by the lawyer. A lawyer may, but shall not be required to, notify the client of the intended use of such funds.

(2) All client funds shall be deposited in the account specified in subsection (1) unless they are deposited in:

(i) a separate interest-bearing trust account for the particular client or client’s matter on which the interest will be paid to the client; or

(ii) a pooled interest-bearing trust account with subaccounting that will provide for computation of interest earned by each client’s funds and the payment thereof to the client.

(3) In determining whether to use the account specified in subsection (1) or an account specified in subsection (2), a lawyer shall consider only whether the funds to be invested could be utilized to provide a positive net return to the client, as determined by taking into consideration the following factors:

(i) the amount of interest that the funds would earn during the period they are expected to be deposited;

(ii) the cost of establishing and administering the account, including the cost of the lawyer’s services and the cost of preparing any tax reports required for interest accruing to a client’s benefit; and

(iii) the capability of financial institutions to calculate and pay interest to individual clients.

(4) As to accounts created under subsection (c)(1l), lawyers or law firms shall direct the depository institution:

(i) to remit interest or dividends, net of reasonable check and deposit processing charges which shall only include items deposited charge, monthly maintenance fee, per item check charge, and per deposit charge, on the average monthly balance in the account, or as otherwise computed in accordance with an institution’s standard accounting practice, at least quarterly, to The Legal Foundation of Washington. Other fees and transaction costs will be directed to the lawyer;

(ii) to transmit with each remittance to the Foundation a statement showing the name of the lawyer or law firm for whom the remittance is sent, the rate of interest applied, and the amount of service charges deducted, if any, and the account balance(s) of the period in which the report is made, with a copy of such statement to be transmitted to the depositing lawyer or law firm.

 3 In light of our answer under RPC 1.14, we need not consider whether the use of a disbursing account for Lawyer’s benefit would create conflict of interest problems under RPC 1.7(b) and 1.8(a).