Disbursement of Trust Funds
Adopted: July 21, 2006
Opinion rules thata lawyer may disburse against deposited items in reliance upon a bank's fundingschedule under certain circumstances.
Inquiry:
Attorney receivesinsurance company checks for payment of workers' compensation and personalinjury settlements. Upon receipt, Attorney deposits these checks into her trustaccount. Because the insurance checks are not among the identified instrumentsin the Good Funds Settlement Act, G.S. §45A-4, she must wait until the fundshave been "irrevocably credited" or collected before disbursing from the trustaccount to the client. RPC 191. Attorney has been unable to locate a bank thatis willing to confirm when deposited funds have been collected.
Attorney hasconsulted with other lawyers in her locality with similar practices. Rather thancall the bank to confirm that the funds have been collected, the lawyersroutinely disburse against items deposited in the trust account, based uponprior dealings with the banks, in accordance with the following fundingschedule: 3 business days for an in-state check and 7 business days for anout-of-state check. Attorney would like to follow this funding or "float"schedule for disbursements, as it appears to be the standard in her community.
May Attorneydisburse funds from her trust account in reliance upon this schedule?
Opinion:
RPC 191 permitslawyers to disburse immediately from the trust account in reliance upon thedeposit of funds provisionally credited to the account if the funds are in theform of cash, wired funds, or one of the enumerated instruments listed in theGood Funds Settlement Act. For all other instruments, a lawyer has anobligation to conduct reasonable due diligence to determine whether fundsdeposited into the trust account have been collected prior to disbursement.
Initially, a lawyeralways should consult with her bank to determine when a particular instrumenthas been collected or funded. Before disbursing, a lawyer should also considerthe source of the funds, i.e., whether the payor is reputable and whether the instrumentis likely to be honored. If a lawyer receives confirmation by the bank that thefunds deposited are collected, then the lawyer may rely upon this informationand disburse against the funds. A lawyer reasonably may rely upon her bank'sfunding or "float" schedule or policyonlywhen the lawyer is unable to confirm whether fundshave been irrevocably credited to his account and he has no reason to believe aparticular instrument will not be honored under the circumstances. In any case,if the lawyer subsequently learns that an instrument has been dishonored, thelawyer must act immediately to protect other trust account property bypersonally paying the amount of any failed deposit or arranging for paymentfrom other sources. "An attorney should take care not to disburse againstuncollected funds in situations where the attorney's assets or credit would beinsufficient to fund the trust account checks in the event that an... item isdishonored." RPC 191.
Therefore, ifAttorney is unable to confirm that a particular insurance check has beencollected, she may reasonably rely upon and disburse in accordance with herbank's funding schedule as long as 1) she reasonably believes the trust accountcheck will be honored, and 2) she is able to fund the check in the event it isultimately dishonored.