North Carolina Administrative Code › Title 27 - STATE BAR › Chapter 02 - RULES OF PROFESSIONAL CONDUCT OF THE NORTH CAROLINA STATE BAR › Section .0100 - CLIENT LAWYER RELATIONSHIP › Section 02 RULE 1.15 - COMMENT TO RULE 1.15 AND ALL SUBPARTS

Current through Register Vol. 39, No. 2, July 15, 2024
[1] The
				purpose of a lawyer's trust account or fiduciary account is to segregate the
				funds belonging to others from those belonging to the lawyer. Money received by
				a lawyer while providing legal services or otherwise serving as a fiduciary
				should never be used for personal purposes. Failure to place the funds of
				others in a trust or fiduciary account can subject the funds to claims of the
				lawyer's creditors or place the funds in the lawyer's estate in the event of
				the lawyer's death or disability.
Property Subject to these Rules
[2] Any property belonging to a client or
				other person or entity that is received by or placed under the control of a
				lawyer in connection with the lawyer's furnishing of legal services or
				professional fiduciary services must be handled and maintained in accordance
				with this Rule 1.15. The minimum records to be maintained for accounts in banks
				differ from the minimum records to be maintained for accounts in other
				financial institutions (where permitted), to accommodate brokerage accounts and
				other accounts with differing reporting practices.
Client Property
[3] Every lawyer who receives funds belonging
				to a client must maintain a trust account. The general rule is that every
				receipt of money from a client or for a client, which will be used or delivered
				on the client's behalf, is held in trust and should be placed in the trust
				account. All client money received by a lawyer, except that to which the lawyer
				is immediately entitled, must be deposited in a trust account, including funds
				for payment of future fees and expenses. Client funds must be promptly
				deposited into the trust account. Client funds must be deposited in a general
				trust account if there is no duty to invest on behalf of the client. Generally
				speaking, if a reasonably prudent person would conclude that the funds in
				question, either because they are nominal in amount or are to be held for a
				short time, could probably not earn sufficient interest to justify the cost of
				investing, the funds should be deposited in the general trust account. In
				determining whether there is a duty to invest, a lawyer shall exercise his or
				her professional judgment in good faith and shall consider the following:
a) The amount of the funds to be
				deposited;
b) The expected duration
				of the deposit, including the likelihood of delay in the matter for which the
				funds are held;
c) The rates of
				interest or yield at financial institutions where the funds are to be
				deposited;
d) The cost of
				establishing and administering dedicated accounts for the client's benefit,
				including the service charges, the costs of the lawyer's services, and the
				costs of preparing any tax reports required for income accruing to the client's
				benefit;
e) The capability of
				financial institutions, lawyers, or law firms to calculate and pay income to
				individual clients;
f) Any other
				circumstances that affect the ability of the client's funds to earn a net
				return for the client.
When regularly reviewing the trust accounts, the lawyer shall
				  determine whether changed circumstances require further action with respect to
				  the funds of any client. The determination of whether a client's funds are
				  nominal or short-term shall rest in the sound judgment of the lawyer or law
				  firm. No lawyer shall be charged with an ethical impropriety or breach of
				  professional conduct based on the good faith exercise of such judgment