Professional Guidelines

An agency of the Supreme Court of Virginia

The Virginia State Bar

Professional Guidelines

20. Maintenance of Trust Accounts; Notice of Election Requirements—

Every trust account maintained by an active member of the VSB under Rules of Professional Conduct 1.15 shall also be maintained at a “financial institution approved by the Virginia State Bar” and maintained in accordance with this paragraph and Rule 1.15. A “financial institution approved by the Virginia State Bar” includes regulated state or federal chartered banks, savings institutions, and credit unions that are properly licensed and authorized to do business, have federal insurance on deposits, and have entered into and agreed to abide by a Virginia State Bar Approved Financial Institution Agreement. (See Appendix A which the Virginia State Bar reserves the right to amend or modify upon notice to all approved financial institutions.) The Virginia State Bar shall maintain and publish from time to time a list of approved financial institutions.

  • A.Interest-bearing Trust Accounts. A lawyer may maintain funds of clients in one or more interest-bearing accounts in one or more financial institutions, whenever the lawyer has established and follows record-keeping, accounting, clerical, and administrative procedures to compute and credit or pay periodically, but at least quarterly, pro rata to each client the interest on such client’s funds less fees, costs, or expenses charged by the lawyer for the record-keeping, accounting, clerical, and administrative procedures associated with computing and crediting or paying such amounts.
  • B.IOLTA Accounts. A lawyer may deposit funds of a client in an identifiable interest-bearing trust (IOLTA) account for which the lawyer has not established procedures to compute and credit or pay pro rata net earnings to such client whenever:
    • 1. At the time of such deposit the lawyer reasonably expects that the fees, costs, or expenses which the lawyer would be entitled to charge under Paragraph 20(A) would equal or exceed the pro rata interest on such client’s funds (The determination of whether the funds of a client or third person can earn income in excess of fees, costs or expenses the lawyer would be entitled to charge under paragraph 20(A) shall rest in the sound judgment of the lawyer or law firm, and no lawyer shall be charged with an ethical impropriety or breach of professional conduct based on the good faith exercise of such judgment); and
    • 2.The financial institution has agreed to:
      • a.Periodically, but at least quarterly, remit to the Legal Services Corporation of Virginia (LSCV) interest or dividends on the average monthly balance of each such account or as otherwise computed in accordance with such bank’s standard accounting practice, provided that such rate of interest shall not be less than the rate paid by such bank to regular, non-attorney depositors;
      • b. Transmit with each remittance to LSCV a statement identifying the name of the lawyer or law firm from whose account the remittance is sent, the rate of interest applied, the period for which the remittance is made, the total amount of interest earned, the service charges or other fees assessed against the account, if any, and the net amount of interest remitted;
      • c. Transmit to the depositing lawyer or law firm at the same time a report showing the amount paid to LSCV from such interest-bearing account, the rate of interest applied, the fees assessed, if any, and the average account balance for the period for which the report is made;
      • d. Charge no fees against an IOLTA trust account that are greater than the fees charged to non-attorney depositors, except that an IOLTA remittance fee may be charged to defray the depository institution’s administrative costs attributable to calculating and remitting the interest to LSCV; other allowable fees are per check charges, per deposit charges, a fee in lieu of a minimum balance and sweep fees.  Allowable, reasonable fees may be deducted from interest or dividends earned on an IOLTA account, provided that such charges or fees shall be calculated in accordance with the Financial Institutions' standard practice for non-IOLTA customers.  Fees or charges in excess of the interest or dividends earned on the IOLTA account, for any month or quarter, shall not be taken from the interest or dividends of any other IOLTA account.  Fees for wire transfers, insufficient funds, bad checks, stop payment, account reconciliation, negative collected balances, and check printing are not considered customary account maintenance charges and are not deductible from the interest or dividends earned on the IOLTA account.  All other fees including those non-customary fees just listed are the responsibility of the lawyer or law firm, who in turn may absorb these specific costs or pass along those fees to the client(s) being served by the transaction in accordance with attorney/client agreements.  Financial Institutions may elect to waive any or all fees on IOLTA accounts in recognition of their charitable nature;
      • e. Collect no fees from the principal deposited in the IOLTA trust account;
      • f. Pay all or part of the funds deposited in such interest-bearing trust account upon demand or order. An IOLTA account may be an interest-bearing check account, a money market account with or tied to check-writing, a sweep account which is a government money market fund or daily overnight financial institution repurchase agreement invested solely in or fully collateralized by United States government securities, or an open-end money market fund solely invested in or fully collateralized by the United States government securities; and
      • g. Agree and abide by all provisions in the Virginia State Bar Approved Financial Institution Agreement.
    • 3. Interest accruing on such accounts and paid by the financial institution to LSCV shall be used for funding 1) civil legal services to the poor in Virginia, 2) LSCV’s administrative expenses, and 3) the creation and augmentation of a reserve fund for the same purposes.
  • C.Non-interest-bearing Trust Accounts. A lawyer may deposit funds of a client in an identifiable non-interest-bearing trust account for which the account accrues no interest or dividends so long as the attorney or law firm receives no consideration or benefit from the Financial Institution for opening a non-interest bearing trust account or for converting from an IOLTA account to a non-interest bearing trust account. A lawyer who elects not to participate in the maintenance of an interest-bearing trust account as described in Paragraph 20(B) must submit such an election in accordance with the procedures set forth in Paragraph 20(F) of this rule.
  • D.Reporting to Client. A lawyer who elects to deposits funds of a client in an account pursuant to Paragraph 20(B) or (C) shall not be required to seek permission from such client in making the election. As to funds deposited in accordance with Paragraph 20(B), a lawyer shall not be required to compute or report to such client any payment to LSCV of interest or dividends by the banking institution on funds in any such account wherein the client’s funds have been deposited by the lawyer.
  • E.Law Firm Trust Accounts. A law firm of which any participating lawyer is a member may maintain the account(s) on behalf of any or all lawyers in the firm.
  • F.Opt-Out of IOLTA Account. A lawyer who elects to open an IOLTA account shall obtain a “Request to Establish IOLTA Account” form from LSCV. A lawyer who elects not to maintain an IOLTA account shall make such election on a “Request to Opt-Out” form provided by LSCV.

APPENDIX A

Virginia State Bar Approved Financial Institution Agreement

This Virginia State Bar Financial Institution Agreement (“Agreement”) is made this _____ day of ______________ , by and between the Virginia State Bar and __________________________ , (“Financial Institution”).

WITNESS:

The undersigned, an officer of the Financial Institution executing this Agreement, being duly authorized to bind said institution by this Agreement, hereby applies to be approved as a depository to receive escrow, trust, or client funds, as defined in Part 6, § IV, Para. 20, of the Rules of Supreme Court of Virginia, or any successor provision(s), from attorneys for deposit in what are hereinafter referred to as “Trust Accounts.” The Financial Institution agrees to comply with the following requirements, or any successor provisions:

  • 1.Notification to Attorneys or Law Firm. To notify the attorney or law firm promptly of an overdraft in any Trust Account or the dishonor for insufficient funds of any instrument drawn on any Trust Account held by it.
  • 2.Notification to Bar Counsel. To report the overdraft or dishonor to Bar Counsel of the Virginia State Bar, as set forth in Paragraph 5 of this Agreement.
  • 3.Audit of Trust Account. To provide reasonable access to the Virginia State Bar of all records of the Trust Account if an audit of such account is ordered pursuant to court order, or upon receipt of a subpoena therefor. The financial institution may charge for the reasonable costs of producing these records.
  • 4.Interest Calculation. The financial institution shall not engage in the practice of “negative netting” as to IOLTA trust accounts.
  • 5.Form of Report. That all such reports shall be substantially in the following format:

    In either case of a dishonored instrument or an instrument presented against insufficient funds in a Trust Account, but honored by the financial institution, the report shall be identical to the notice customarily forwarded to the depositor and shall include the name and address of the depositor notified, including the name of the lawyer responsible for the account, as well as a copy of the dishonored instrument, if such copy is normally provided to the depositor. In addition, the report shall identify the financial institution reporting the overdraft, the account number, the date of the overdraft, the name of the person making the report, their address and telephone number and date. The report shall be made simultaneously with and within the time provided by law for notice of dishonor to the depositor or, in the case of instruments that are honored by the financial institution, within five (5) banking days after the date of presentation for payment against insufficient funds.

  • 6.Consent of Attorneys or Law Firms. The Financial Institution may require, as a condition to opening an attorney Trust Account, the written consent of the attorney or law firm opening such account to the notification to Bar Counsel of the Virginia State Bar as set forth in Paragraph 2 of this Agreement.
  • 7.Change of Name or Corporate Form. If a Financial Institution changes its name, merges or otherwise affiliates with, or is acquired by another entity, the successor Financial Institution shall promptly notify Bar Counsel of the change and whether the successor institution wishes to serve as a financial institution approved by the Virginia State Bar for attorney Trust Accounts and enter into an Agreement.
  • 8.Termination of Agreement. This Agreement may terminate upon thirty (30) days notice from the Financial Institution in writing to Bar Counsel that the institution intends to terminate the Agreement on a stated date and that copies of the termination notice have been mailed to all attorneys and law firms that maintain Trust Accounts with the Financial Institution or any branch thereof. Notice to the Bar Counsel shall be sent by certified mail to the Virginia State Bar, Attention: Bar Counsel, 707 E. Main Street, Suite 1500, Richmond, Virginia 23219? 2800. This agreement may also be canceled without prior notice by Bar Counsel of the Virginia State Bar if the financial institution fails to abide by the terms of the agreement.
  • 9.Binding Effect. This Agreement shall be binding upon the Financial Institution and any branch thereof receiving Trust Accounts.
  • 10.Definition. For purposes of this agreement the following definitions will apply:
    • a. “Notice of Dishonor” refers to the notice which, pursuant to Uniform Commercial Code Section 3-508(2), must be given by a drawee bank before its midnight deadline.
    • b. “Insufficient funds” refers to a state of affairs in which there is an insufficient collected balance in an account as reflected in the financial institution’s accounting records, so that an otherwise properly payable item presented for payment cannot be paid without creating an overdraft in the account.
    • c. “Dishonored” shall refer to instruments that have been dishonored because of insufficient funds as defined above.
    • d. “Negative Netting” refers to the practice of a financial institution collecting some part or all of the fees assessed during a stated period of time against any IOLTA account that has failed to generate enough interest to pay assessed fees from the positive interest generated by other IOLTA accounts and deducting those fees from the total interest remitted to the Legal Services Corporation of Virginia for that time period.
    • IN WITNESS WHEREOF, the Financial Institution has executed this Agreement on the date and year written above.

ATTEST:



___________________________________
Name of Financial Institution


___________________________________
Address of Financial Institution

___________________________________


By_________________________________
Officer’s Name
(Please print)


___________________________________
Officer's Signature


___________________________________
Corporate Office Held

Updated: July 11, 2011