July 5, 2011
New Illinois Rule On Entrusted Funds
Illinois has adopted a significantly revised Rule 1.15 that will go into operation on September 1, 2011. The web page of the Attorney Registration & Grievance Commission has this link to questions about the effect of the new rule with the following summary of changes:
There are three key changes and are contained in paragraphs (a), (f) and (h) of Rule 1.15:
1. Only Two Types of Client Trust Accounts – Paragraphs (a), (f) and (g) clarifies that there are only two options for depositing client funds and that all trust funds must be held:
- at interest
- in an eligible financial institution
- in either:
an IOLTA Client Trust Account (a pooled interest- or dividend-bearing client trust account that holds nominal or short-term funds of several clients and third persons with the Lawyers Trust Fund designated as the income beneficiary)
a Non-IOTLA Client Trust Account (a separate, interest- or dividend-bearing client trust account established for the benefit of a particular client or client matter where the net income earned on the funds is paid to the client or third person.)
Rule 1.15 expressly prohibits non-interest or non-dividend-bearing trust accounts. See Rule 1.15(a) and (f).
2. Recordkeeping Requirement – Subparagraphs (1) through (8) to Rule 1.15(a) adds specific recordkeeping requirements for records relating to client trust funds.
3. Automatic Overdraft Notification – Paragraph (h) adds an automatic overdraft notification provision whereby eligible financial institutions have agreed to report to the ARDC anytime a properly payable instrument is presented against a client trust account containing insufficient funds, irrespective of whether or not the instrument is honored.
If you handle other people's money (including advanced fees), compliance with Rule 1,15 is an absolute necessity. Negligence is no defense to a charge of non-compliance. (mike Frisch)
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