Rule 1.14 of the Texas Disciplinary Rules of Professional Conduct requires that a lawyer hold funds belonging in whole or in part to clients separate from the lawyer's own property. In other words, client funds are not to be commingled with attorney funds. Such funds are to be kept in a separate account, called a trust account. The State Bar is very serious about disciplining lawyers who mix client funds with the lawyer's operating account.
On December 13, 1988, the Texas Supreme Court signed an Order that established a mandatory "Interest on Lawyers' Trust Accounts" (IOLTA) program. When a lawyer receives client funds in a nominal amount, or which will only be kept for a short time, and which are not earned yet (such as a retainer), or if a check is received which belongs both to the client and the lawyer, these funds must be placed in a special trust account. The interest generated by these funds must be paid to the Texas Equal Access to Justice Foundation, which is a nonprofit organization that funds grants to other nonprofit organizations, which furnish civil legal assistance to low income Texans. This interest is remitted directly by the bank.
In my practice, all settlement checks I receive are deposited into my trust account until they can be properly disbursed. Retainer checks to be applied against hourly fees are also deposited in my trust account until they are earned or refunded, as provided in the written contract of employment. This routine insures that client funds are not commingled with operating funds. If there are client funds from the retainer remaining in my trust account after all fees and expenses are paid at the conclusion of the case, those retainer funds are refunded to the client.
Written by Donald Ray Burger, Attorney at Law
Last revised: May 16, 1996
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