The safekeeping of property is a well-known responsibility of lawyers. Attorneys understand that we must take great care in holding and accounting for any money in our possession that belongs to clients or third parties. But what happens when a lawyer has kept a client’s money safe, and the client is nowhere to be found come time for distribution? Does the lawyer keep the money in trust indefinitely? Do the funds become the property of the law firm? Review the steps below to identify and process abandoned funds.
Step 1: Reconcile Your Trust Account Regularly
First, reconcile your trust account regularly. We recommend monthly reconciliation. Proper reconciliation includes a three-way comparison of the following:
When these three amounts match, the trust account is balanced. All monies should be accounted for, with a clear record of what amounts belong to whom within the account. Notify clients promptly when they are due funds, and hold those funds in trust until distribution, unless the money is deemed abandoned.
Regular reconciliation makes error detection and correction easy, and it helps prevent an overdraft. If you need assistance reconciling your trust account records, see our resources below.
Step 2: Identify Abandoned Funds
Next, sometimes clients or third parties fail to claim funds or to deposit outstanding checks. When this happens, determine whether you can find the owner or whether the property is abandoned. Money in a lawyer trust account is presumed abandoned if the owner has not expressed an interest in the funds for two years. File review and regular reconciliation can help you evaluate whether the owner has shown any interest in their money, including initiating or responding to contact with you, or adding to or removing some of the funds. Funds abandoned as of June 30 each year must be reported in October of the same year.
Step 3: Report and Remit Funds
Even a well-managed trust account may end up with abandoned funds. These funds do not belong to the law firm, and they do not remain held in trust in perpetuity. Instead, lawyers must reconcile their trust accounts regularly, identify abandoned funds timely, and report and remit any unclaimed money to the proper organization.
- Frequently Asked Trust Account Questions
- Trust Account Reconciliation
- Checklist for Closing Your IOLTA Account
- A Guide to Setting Up and Using Your Lawyer Trust Account
- Formal Opinion No 2005-48
Trust Accounts: Unclaimed Client Funds in Trust
- See ORS 98.302-98.436 re: Uniform Disposition of Unclaimed Property Act