An Update on the Safety of IOLTA Funds

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When the banking crisis began in earnest early last fall, we wrote a column that raised concern over the implications of a bank failure upon a lawyer's responsibility to keep client IOLTA trust funds safe. The concern centered on the fact that every State imposes a fiduciary duty of adequate safekeeping for clients' funds to prevent misappropriation or negligence. The lawyer is responsible for acts of an agent, which in the case of a client trust account is the bank. If the bank fails, the lawyer, in light of the rules of professional conduct, is responsible. This would particularly have been the case for trust accounts that exceeded the longtime Federal Deposit Insurance Corporation guaranteed limit of $100,000, which in the event of bank failure would have put any amount over the limit at risk.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ed Poll, LawBiz | Attorney Advertising

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