Rule 1.15-4 Alternative Trust Account Management Procedure for Multi-Member Firm
(a) Trust Account Oversight Officer (TAOO).
Lawyers in a law firm of two or more lawyers may designate a partner in the firm to serve as the trust account oversight officer (TAOO) for any general trust account into which more than one firm lawyer deposits trust funds. The TAOO and the partners of the firm, or those with comparable managerial authority (managing lawyers), shall agree in writing that the TAOO will oversee the administration of any such trust account in conformity with the requirements of Rule 1.15, including, specifically, the requirements of this Rule 1.15-4. More than one partner may be designated as a TAOO for a law firm.
(b) Limitations on Delegation.
Designation of a TAOO does not relieve any lawyer in the law firm of responsibility for the following:
(1) oversight of the administration of any dedicated trust account or fiduciary account that is associated with a legal matter for which the lawyer is primary legal counsel or with the lawyer’s performance of professional fiduciary services; and
(2) review of the disbursement sheets or statements of costs and receipts, client ledgers, and trust account balances for those legal matters for which the lawyer is primary legal counsel.
(c) Training of the TAOO.
(1) Within the six months prior to beginning service as a TAOO, a lawyer shall,
(A) read all subparts and comments to Rule 1.15, all formal ethics opinions of the North Carolina State Bar interpreting Rule 1.15, and the North Carolina State Bar Trust Account Handbook;
(B) complete one hour of accredited continuing legal education (CLE) on trust account management approved by the State Bar for the purpose of training a lawyer to serve as a TAOO;
(C) complete two hours of training (live, online, or self-guided) presented by a qualified educational provider on one or more of the following topics: (i) financial fraud, (ii) safeguarding funds from embezzlement, (iii) risk assessment and management for bank accounts, (iv) information security and online banking, or (v) accounting basics; and
(D) become familiar with the law firm’s accounting system for trust accounts.
(2) During each year of service as a TAOO, the designated lawyer shall attend one hour of accredited continuing legal education (CLE) on trust account management approved by the State Bar for the purpose of training a TAOO or one hour of training, presented by a qualified educational provider, on one or more of the subjects listed in paragraph (c)(1)(C).
(d) Designation and Annual Certification.
The written agreement designating a lawyer as the TAOO described in paragraph (a) shall contain the following:
(1) A statement by the TAOO that the TAOO agrees to oversee the operation of the firm’s general trust accounts in compliance with the requirements of all subparts of Rule 1.15, specifically including the mandatory oversight measures in paragraph (e) of this rule;
(2) Identification of the trust accounts that the TAOO will oversee;
(3) An acknowledgement that the TAOO has completed the training described in paragraph (c)(1) and a description of that training;
(4) A statement certifying that the TAOO understands the law firm’s accounting system for trust accounts; and
(5) An acknowledgement that the lawyers in the firm remain professionally responsible for the operation of the firm’s trust accounts in compliance with Rule 1.15.
Each year on the anniversary of the execution of the agreement, the TAOO and the managing lawyers shall execute a statement confirming the continuing designation of the lawyer as the TAOO, certifying compliance with the requirements of this rule, describing the training undertaken by the TAOO as required by paragraph (c)(2), and reciting the statements required by subparagraphs (d)(1), (2), (4), and (5). During the lawyer’s tenure as TAOO and for six years thereafter, the agreement and all subsequent annual statements shall be maintained with the trust account records (see Rule 1.15-3(g)).
(e) Mandatory Oversight Measures.
In addition to any other record keeping or accounting requirement set forth in Rule 1.15-2 and Rule 1.15-3, the firm shall adopt a written policy detailing the firm’s trust account management procedures which shall annually be reviewed, updated, and signed by the TAOO and the managing lawyers. Each version of the policy shall be retained for the minimum record keeping period set forth in Rule 1.15-3(g).
History Note: Statutory Authority G.S. 84-23
Adopted by the Supreme Court: June 9, 2016
Ethics Opinion Notes
RPC 4. Opinion rules that money belonging to an incarcerated client may be handled by the Public Defender as a favor and must be deposited into a trust account.
RPC 37. Opinion rules that a law firm which has received money representing the refund of an appeal bond to a client owing substantial fees to the firm may apply the appeal bond refund to the fees if an agreement with the client would authorize the firm to do so.
RPC 44. Opinion rules that a closing attorney must follow the lender's closing instruction that closing documents be recorded prior to disbursement.
RPC 47. Opinion rules that an attorney who receives from his or her client a small sum of money which is to be used to pay the cost of recording a deed must deposit that money in a trust account.
RPC 48. Opinion outlines professional responsibilities of lawyers involved in a law firm dissolution.
RPC 51. Opinion rules that where a lawyer receives a lump sum payment in advance which is inclusive of the costs of litigation, the portion representing the costs must be deposited in the trust account.
RPC 66. Opinion rules that an attorney serving as an escrow agent may not disburse in a manner not contemplated by the escrow agreement unless all parties agree.
RPC 69. Opinion rules that a lawyer must obey the client's instruction not to pay medical providers from the proceeds of settlement in the absence of a valid physician's lien.
RPC 75. Opinion rules that a lawyer may not pay his or her fee or the fee of a physician from funds held in trust for a client without the client's authority.
RPC 78. Opinion rules that a closing attorney cannot make conditional delivery of trust account checks to real estate agent before depositing loan proceeds against which checks were to be drawn.
RPC 86. Opinion discusses disbursement against uncollected funds, accounting for earnest money paid outside closing and representation of the seller.
RPC 89. Opinion rules that trust funds must be held at least five years after the last occurrence of certain prescribed events before they may be deemed abandoned.
RPC 96. Opinion rules that attorneys practicing in North Carolina who are affiliated with an interstate law firm may not permit trust funds belonging to their clients to be deposited in a trust account maintained outside North Carolina without written consent.
RPC 125. Opinion rules that a lawyer may not pay a medical care provider from the proceeds of a settlement negotiated prior to the filing of suit over his client's objection unless the funds are subject to a valid lien.
RPC 149. Opinion rules that an attorney may not donate a client's funds to a charity without the client's consent.
RPC 150. Opinion rules that an attorney cannot permit the bank to link her trust and business accounts for the purpose of determining interest earned or charges assessed if such an arrangement causes the attorney to use client funds from the trust account to offset service charges assessed on the business account.
RPC 158. Opinion rules that a sum of money paid to a lawyer in advance to secure payment of a fee which is yet to be earned and to which the lawyer is not entitled must be deposited in the lawyer's trust account.
RPC 191. Opinion rules that a lawyer may make disbursements from his or her trust account in reliance upon the deposit of funds provisionally credited to the account if the funds are deposited in the form of cash, wired funds, or by specified instruments which, although they are not irrevocably credited to the account upon deposit, are generally regarded as reliable.
RPC 209. Opinion provides guidelines for the disposal of closed client files.
RPC 226. Opinion rules that when a law firm receives funds that are not identified as client funds, the firm must investigate the ownership of the funds and, if it is reasonable to conclude the funds do not belong to a client or a third party, the firm may conclude that the funds belong to the firm.
RPC 234. Opinion rules that an inactive client file may be stored in an electronic format provided original documents with legal significance are preserved and the documents in the electronic file can be reproduced on paper.
RPC 247. Opinion provides guidelines for receipt of payment of earned and unearned fees by electronic transfers.
97 Formal Ethics Opinion 4. Opinion provides that flat fees may be collected at the beginning of a representation, treated as presently owed to the lawyer, and deposited into the lawyer's general operating account or paid to the lawyer but that if a collected fee is clearly excessive under the circumstances of the representation, a refund to the client of some or all of the fee is required.
97 Formal Ethics Opinion 9. Opinion rules that, provided steps are taken to safeguard the client funds on deposit in a trust account, a lawyer may accept fees paid by credit card although the bank's agreement to process such charges authorizes the bank to debit the lawyer's trust account in the event a credit card charge is disputed by a client.
98 Formal Ethics Opinion 11. Opinion rules that the fiduciary relationship that arises when a lawyer serves as an escrow agent demands that the lawyer be impartial to both the obligor and the obligee and, therefore, the lawyer may not act as advocate for either party against the other. Once the fiduciary duties of the escrow agent terminate, the lawyer may take a position adverse to the obligor or the obligee provided the lawyer is not otherwise disqualified.
98 Formal Ethics Opinion 14. Opinion rules that a lawyer may participate in the solicitation of funds from third parties to pay the legal fees of a client provided there is disclosure to contributors and the funds are administered honestly.
98 Formal Ethics Opinion 15. Opinion rules that whether the year 2000 computer problem is being adequately addressed by a depository bank should be considered when selecting a depository bank for a trust account.
2000 Formal Ethics Opinion 4. Opinion rules that a lawyer may sign a statement acknowledging a finance company's interest in a client's recovery subject to certain conditions.
2001 Formal Ethics Opinion 3. Opinion rules that a lawyer may settle a tort claim by making disbursements from a trust account in reliance upon the deposit of funds provisionally credited to the account if the deposited funds are in the form of a financial instrument that is specified in the Good Funds Settlement Act, G.S. Chap. 45A.
2001 Formal Ethics Opinion 11. Opinion rules that when a client authorizes a lawyer to assure a medical provider that it will be paid upon the settlement of a personal injury claim, the lawyer may subsequently withhold settlement proceeds from the client and maintain the funds in her trust account, although there is no medical lien against the funds, until a dispute between the client and the medical provider over the disbursement of the funds is resolved.
2001 Formal Ethics Opinion 14. Opinion rules that retaining a CD-ROM with digital images of trust account checks that is provided by the depository bank satisfies record-keeping requirements for trust accounts.
2005 Formal Ethics Opinion 11. Opinion examines the requirements for an interim account used to pay the costs for real estate closings and also rules that the actual costs may be marked up by the lawyer provided there is full disclosure and the overcharges are not clearly excessive.
2005 Formal Ethics Opinion 13. Opinion rules that a minimum fee that will be billed against at an hourly rate and is collected at the beginning of representation belongs to the client and must be deposited into the trust account until earned and, upon termination of representation, the unearned portion of the fee must be returned to the client.
2006 Formal Ethics Opinion 8. Opinion rules thata lawyer may disburse against deposited items in reliance upon a bank's fundingschedule under certain circumstances.
2006 Formal Ethics Opinion 15. Opinion rules that a lawyer may charge a reasonable dormancy fee against unclaimed funds if the client agrees in advance and the fee meets other statutory requirements.
2006 Formal Ethics Opinion 16. Opinion rules that under certain circumstances a lawyer may consider a dispute with a client over legal fees resolved and transfer funds from the trust account to his operating account to pay those fees.
2008 Formal Ethics Opinion 10. Opinion surveys prior ethics opinions on legal fees, sets forth the ethical requirements for the different types of fees paid in advance, authorizes minimum fees earned upon payment, and provides model fee provisions.
2008 Formal Ethics Opinion 13. Opinion rules that, unless affected clients expressly consent to the disclosure of their confidential information, a lawyer may allow a title insurer to audit the lawyer's real estate trust account and reconciliation reports only if certain written assurances to protect client confidences are obtained from the title insurer, the audited account is only used for real estate closings, and the audit is limited to certain records and to real estate transactions insured by the title insurer.
2009 Formal Ethics Opinion 4. Opinion rules that a law firm may establish a credit card account that avoids commingling by depositing unearned fees into the law firm's trust account and earned fees into the law firm's operating account provided the problem of chargebacks is addressed.
2010 Formal Ethics Opinion 4. Opinion provides guidelines for participation in a barter exchange.
2011 Formal Ethics Opinion 6. Opinion rules that a lawyer may contract with a vendor of software as a service provided the lawyer uses reasonable care to safeguard confidential client information.
2011 Formal Ethics Opinion 7. Opinion rules that a law firm may use online banking to manage its trust accounts provided the firm’s managing lawyers are regularly educated on the security risks and actively maintain end-user security.
2011 Formal Ethics Opinion 10. Opinion rules that a lawyer may advertise on a website that offers daily discounts to consumers where the website company’s compensation is a percentage of the amount paid to the lawyer if certain disclosures are made and certain conditions are satisfied.
2011 Formal Ethics Opinion 13. Editor's note: This opinion is not intended to imply that a lawyer for an estate is required to petition the clerk for approval of the lawyer’s fee, however, the personal representative’s commission may be reduced if the Clerk of Court does not approve the lawyer’s fee in advance.
Opinion rules that client funds or the funds of a third party that are placed in the lawyer’s control for the purpose of being safeguarded, managed, or disbursed in connection with a transaction, but which were not designated or identified as funds for the payment of legal fees, may not be retained in the trust account, pursuant to Rule 1.15-2(g), as disputed funds to which the lawyer may be entitled.
2017 Formal Ethics Opinion 2. Opinion rules that a lawyer representing an estate must maintain the checking account for the estate in accordance with Rule 1.15 consistent with the extent to which the lawyer has control over the account.
2017 Formal Ethics Opinion 4. Opinion rules that a lawyer is prohibited from disbursing settlement funds pursuant to the client’s directive if the funds are subject to a perfected lien.