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Attorney Trust Account Indiana

New rules reflect renewed focus on attorney trust accounts
Estate of Nancy Ethel Kryder in 1981, Glenn Bordner self-appointed Higgins

For most, the new year means personal resolutions to keep for a week and then abandon. For Indiana attorneys, the new year marks the effective date of the new Admission and Discipline Rule 23. The Indiana Supreme Court Disciplinary Commission and its staff have undertaken a wholesale revision of Admission and Discipline Rule 23, which is the rule governing the attorney disciplinary process. The importance of Rule 23 is generally limited only to those unlucky few who find themselves being investigated or prosecuted by the Disciplinary Commission.

However, Rule 23 also contains substantive provisions on how each lawyer must manage his or her trust account. Included in the new Rule 23 is a complete rewrite of the specific attorney trust accounting rules located outside the conceptual fiduciary provisions of Professional Conduct Rule 1.15. These new trust account rules are contained in Sections 29 and 30 and will apply to almost every attorney in private practice. Among the most notable changes:

Supporting documents required. Professional Conduct Rule 1.15(a) currently mandates that lawyers keep “[c]omplete records of such account funds and other property” for a period of five years after termination of a representation. The existing Rule 23 vainly attempted to explain this so-called “complete records” requirement, but the explanation was ambiguous at best. The ambiguity exists no more. As of Jan. 1, all lawyers holding funds of others will be required to keep:

• A deposit and disbursement journal, which is defined as a document reflecting each deposit into and disbursement from an attorney trust account. This deposit and disbursement journal is a record tracking the trust account balance as a pooled whole and should reconcile with the trust account bank statement (as adjusted for deposits and disbursements in transit).

• A client ledger, which is a document created for each client reflecting the amount of funds disbursed or deposited, the date of disbursement or deposit, the source of funds deposited, the payee of funds disbursed, and most importantly, a running total of the amounts held in trust for that client or beneficiary. These ledgers must be “sufficient to determine, at any time, the amount held for each client or other beneficiary in relation to the total amount held in the trust account as a pooled whole.”

• A ledger tracking the nominal amount of attorney-owned funds held in the trust account, if applicable.

• Records of all electronic disbursements, including the name of the person authorizing the disbursement, the date of the disbursement, the name of the recipient, the purpose of the disbursement, and the client or beneficiary for whom the disbursement was made.

Safe harbor for records. Worry not if your eyes just glazed over; there are now exhibits in the new Rule 23 with examples of each type of required trust account record. Although the new rule does not refer to these exhibits as a “safe harbor, ” it seems reasonable that an attorney who keeps accurate and contemporaneous records similar to the examples set forth in Section 29 will satisfy the “complete records” requirement of Professional Conduct Rule 1.15.

Periodic reconciliation required. The new Rule 23 explicitly requires attorneys to reconcile their trust account records, specifically by ensuring that the sum of their ledgers reconciles with the deposit and disbursement journal, which reconciles with the bank statement. Furthermore, attorneys must keep records of these periodic reconciliations for a period of five years after the conclusion of the representation. Presumably, these reconciliation reports will be one of the first documents requested by the Disciplinary Commission when investigating allegations of trust account mismanagement.

Fee agreement retention. Lawyers will now be required to keep “relevant fee agreements” for a period of five years from the conclusion of a representation. This revision does not mandate that attorneys execute written fee agreements unless currently required to do so under existing law, but rather requires a lawyer to retain any fee agreement that is executed.


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