January 2008

Ask the Auditor

New User-Friendly Model: Completing Your Trust Account Declaration Form

by Trina Doty

All WSBA attorneys should have received their annual licensing packet by now. In your packet, you'll notice an updated Trust Account Declaration (form B1). Every year we try to make the declaration easier to understand, but every year it seems to get more complicated. Part of the difficulty is that Regulation 106 requires us to ask for specific information. But this newly updated form is in response to comments we've received about the complexity of the declaration. We hope the new form is easier to understand.

All active attorneys must complete and submit a trust account declaration every year. This applies to every WSBA member in active status, whether or not you are actually practicing law or have a trust account. These forms are due February 1, 2008. If you did not receive your annual licensing packet, you should contact the WSBA Service Center at 800-945-WSBA (9722) or 206-443-WSBA (9722) to obtain one. Following is a short Q&A on the Trust Account Declaration to help you complete your form for this year.

Must I complete this form every year, even if the information hasn't changed since last year?

Yes. It isn't sufficient to indicate on the form that there has been no change from the previous year. Rule 15.5 of the Rules for Enforcement of Lawyer Conduct requires each active lawyer to complete, execute, and deliver to the Association this declaration by the date specified annually. The information you complete on the form must be current and complete, including your trust account information.

If I don't send in a form, won't it be obvious to WSBA that I don't have a trust account?

No. If you fail to send in a Trust Account Declaration, we will not assume that you do not maintain a trust account and you may be subject to discipline.

Do I have to answer every question if I'm not engaged in the practice of law?

You must answer every question in Part 1. You complete Part II only if you have an IOLTA account.

I'm an associate in a large firm and have nothing to do with the trust account. How can I certify trust account records and client funds are being maintained in compliance with the trust account rules?

Every attorney must personally respond to the request to certify that funds are handled correctly. If you work for a firm and have questions about the trust account, talk to the managing partner and/or accounting staff until you feel comfortable signing the certification. You should have an understanding of how a trust account works and how your firm manages its account.

Can my firm fill out my declaration for me?

Someone in your firm may complete Part II or prepare a separate piece of paper with the firm's trust account information on it to attach to your declaration. However, you must personally certify whether you are in compliance and sign and date the form under Part I. If you do not, the form will be returned to you as incomplete.

Question B on the form relates to handling client funds. What is meant by client funds?

Client funds are funds in your or your law firm's possession that belong to your clients or third persons. These funds are received in connection with a representation for which you are required to use your Washington license. Examples are advance fee deposits, settlement proceeds, escrow funds, and client overpayments. Earned fees you receive are not client funds. If you receive only earned fees from clients, you should check that you do not handle client funds.

Are there ever any circumstances when I would indicate that I do not handle client funds, but that I do maintain an IOLTA account?

Not usually. Some attorneys respond this way because they no longer accept client funds, but still have residual client money that needs to be refunded. If that's the case, you should indicate that you are handling client funds. These client funds should then be refunded so you can close your trust account. If you cannot locate the clients or discover funds in your trust account that you cannot identify as belonging to you or your client, these should be remitted to the Unclaimed Property Division of the Washington State Department of Revenue.

Attorneys often believe they are required to have an IOLTA account to maintain their license, whether they handle client funds or not. If you do not handle client funds, you do not need to open an IOLTA account.

If I practice in multiple states and/or Canadian provinces, whose rules do I follow regarding the trust account and client funds?

The WSBA Trust Account Declaration relates only to the practice of law under your Washington license. All states and provinces have different requirements regarding safekeeping of client funds. When you receive client funds, you must analyze if you are holding these funds in connection with a representation where you are using your Washington license. If you are using your Washington license, then you must place these funds in an IOLTA account that meets the requirements of RPC 1.15A.

If you have IOLTA accounts in other states or Canadian provinces, you should not provide information regarding those accounts on your Washington Trust Account Declaration.

Question C relates to a Washington IOLTA. Does this mean my IOLTA account must be located in Washington state?

No. A Washington IOLTA is any IOLTA account where the interest goes to the Legal Foundation of Washington. These accounts can be located in any state. But we are interested only in Washington IOLTAs. Please do not include IOLTAs where the interest goes to other states' funds.

Do I need to list all trust accounts that I maintain in Part II of the declaration?

No. Provide bank account information only for any IOLTA or pooled interest-bearing accounts you have open. You do not need to provide bank account information for your individual client trust accounts.

Do I need to update my trust account declaration when I open or close an IOLTA account or change banks during the year?

No. You will update your information when you file next year's Trust Account Declaration.

If you have a question about your trust account declaration that isn't answered here, please feel free to call the WSBA Service Center at 800-945-WSBA (9722) or 206-443-WSBA (9722) or e-mail questions@wsba.org.

Trina Doty is the WSBA audit manager. She is a CPA and a certified fraud examiner. She oversees the random-examination program, conducts "for cause" audits, and educates attorneys about the trust account rules and regulations. She can be reached at trinad@wsba.org.