Tressler Partner and Chicago office Managing Partner, D.J. Sartorio, has authored “Management Playlist: Whose money is it?” published by the Chicago Lawyer, Aug. 1, 2013. D.J.’s Management Playlist column appears monthly in Chicago Lawyer magazine.
In “Whose money is it?” D.J. writes that in 2012 the Attorney Registration & Disciplinary Commission docketed 715 charges of improper management of client or third‐party funds; 36 percent of the complaints filed by the ARDC in 2012 involved improper handling of trust funds.
Rule 1.15 of the Illinois Rules of Professional Conduct applies whenever a lawyer holds the property (usually money) of a client or third person in connection with a representation. He writes: “When holding such property in trust, remember the acronym SAI.
“S” — The property must be kept separate from your own property.
“A” — You must be able to make an accurate accounting of the property at all times.
“I” – You must maintain a client trust account that is clearly identifiable as such.
“To fulfill the requirements of Rule 1.15, each element of SAI must be met.”
However, D.J. also lists and discusses trust account facts that are less familiar to lawyers. For example:
Illinois Supreme Court Rule 756(d) requires lawyers to disclose whether their firm maintains a trust account; if not, they must explain why.
Client trust accounts must be maintained at “eligible financial institutions.”
A deposit in a client trust account cannot be distributed until the deposited item has cleared the banking process and been credited to the client trust account.
Rule 1.15(c) establishes three different types of retainers. The type of retainer used controls how a lawyer manages the deposit and ultimate receipt of such money.
Lawyers are required to keep and preserve for a period of seven years after termination of representation detailed records of client trust account funds and transactions as set forth in Rule 1.15(a)(1) ‐ 1.15(a)(8).
If funds remain in the client trust account for five years because a lawyer or firm cannot locate the client or third person to whom to transmit the funds, an issued check goes uncashed or the amount of money cannot be traced to its owner, such funds should be remitted to the Illinois Unclaimed Property Division of the state treasurer pursuant to the Uniform Disposition of Unclaimed Property Act.
D.J. writes that there are a variety of ways to mismanage a trust account if the dictates of SAI are not followed. “The three most common areas of trouble may be summed up by the ABCs of trust account mistakes.
“A” is for failing to account for trust funds in accordance with Rule 1.15(a).
“B” is for borrowing money from the trust account.
“C” is for commingling.
“You should not deposit or keep your funds in a trust account containing client funds,” writes D.J. “Nor should you deposit or keep client funds in an account that is not a trust account and that contains your own funds.”
Usual traps in this regard involve the deposit and transfer of retainers, credit card payments, unidentified funds, advanced expenses and receipt of mixed character funds.
“Consequently,” D.J. concludes, “not only do you need to know whose money you have, you need to be able to SAI it.”
For a copy of the article, please visit the Chicago Lawyer magazine’s website by CLICKING HERE. Alternatively, you may contact the author directly at djsartorio@tresslerllp.com or 312-627-4093.
About the Author
D.J. Sartorio has more than 30 years experience as an insurance and appellate lawyer. He has extensive experience representing insurance companies in litigation, coverage analysis and underwriting consulting. He has successfully handled appeals throughout the United States, including one that changed Illinois law with respect to expert disclosures. Active in firm management, D.J. has served on Tressler’s four-person Executive Committee, which is the governing body of the firm, since 2001, and presently also serves as Managing Partner of the firm’s Chicago office.
In “Whose money is it?” D.J. writes that in 2012 the Attorney Registration & Disciplinary Commission docketed 715 charges of improper management of client or third‐party funds; 36 percent of the complaints filed by the ARDC in 2012 involved improper handling of trust funds.
Rule 1.15 of the Illinois Rules of Professional Conduct applies whenever a lawyer holds the property (usually money) of a client or third person in connection with a representation. He writes: “When holding such property in trust, remember the acronym SAI.
“S” — The property must be kept separate from your own property.
“A” — You must be able to make an accurate accounting of the property at all times.
“I” – You must maintain a client trust account that is clearly identifiable as such.
“To fulfill the requirements of Rule 1.15, each element of SAI must be met.”
However, D.J. also lists and discusses trust account facts that are less familiar to lawyers. For example:
Illinois Supreme Court Rule 756(d) requires lawyers to disclose whether their firm maintains a trust account; if not, they must explain why.
Client trust accounts must be maintained at “eligible financial institutions.”
A deposit in a client trust account cannot be distributed until the deposited item has cleared the banking process and been credited to the client trust account.
Rule 1.15(c) establishes three different types of retainers. The type of retainer used controls how a lawyer manages the deposit and ultimate receipt of such money.
Lawyers are required to keep and preserve for a period of seven years after termination of representation detailed records of client trust account funds and transactions as set forth in Rule 1.15(a)(1) ‐ 1.15(a)(8).
If funds remain in the client trust account for five years because a lawyer or firm cannot locate the client or third person to whom to transmit the funds, an issued check goes uncashed or the amount of money cannot be traced to its owner, such funds should be remitted to the Illinois Unclaimed Property Division of the state treasurer pursuant to the Uniform Disposition of Unclaimed Property Act.
D.J. writes that there are a variety of ways to mismanage a trust account if the dictates of SAI are not followed. “The three most common areas of trouble may be summed up by the ABCs of trust account mistakes.
“A” is for failing to account for trust funds in accordance with Rule 1.15(a).
“B” is for borrowing money from the trust account.
“C” is for commingling.
“You should not deposit or keep your funds in a trust account containing client funds,” writes D.J. “Nor should you deposit or keep client funds in an account that is not a trust account and that contains your own funds.”
Usual traps in this regard involve the deposit and transfer of retainers, credit card payments, unidentified funds, advanced expenses and receipt of mixed character funds.
“Consequently,” D.J. concludes, “not only do you need to know whose money you have, you need to be able to SAI it.”
For a copy of the article, please visit the Chicago Lawyer magazine’s website by CLICKING HERE. Alternatively, you may contact the author directly at djsartorio@tresslerllp.com or 312-627-4093.
About the Author
D.J. Sartorio has more than 30 years experience as an insurance and appellate lawyer. He has extensive experience representing insurance companies in litigation, coverage analysis and underwriting consulting. He has successfully handled appeals throughout the United States, including one that changed Illinois law with respect to expert disclosures. Active in firm management, D.J. has served on Tressler’s four-person Executive Committee, which is the governing body of the firm, since 2001, and presently also serves as Managing Partner of the firm’s Chicago office.