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Ethics Opinion

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March 1, 1991


    A trust account established pursuant to MRPC 1.15(d)(2) need not be insured by an agency of the federal government.

    Reference: MRPC 1.15.


A lawyer asks whether funds deposited in a lawyer's trust account authorized by MRPC 1.15(d)(2) must be insured by an agency of the federal government. The question arises because so-called IOLTA accounts must, pursuant to MRPC 1.15 (d)(1)(C), be so insured, while no such express direction exists for those accounts established under paragraph (d)(2).

As of October 1, 1990, all client and third party funds in a lawyer's possession, except advances for costs and expenses, must be deposited in an interest-bearing account in:

    "one or more identifiable banks, savings and loan associations, or credit unions maintained in the state in which the law office is situated . . . ." MRPC 1.15(a). Emphasis added.

The interest earned can be paid to the Michigan State Bar Foundation, or to the individual clients, depending whether the trust account is established under paragraph (d)(1) or paragraph (d)(2); in the latter case, the lawyer may segregate accounts for individual clients or maintain a commingled account and provide a "spread sheet" proration of interest among those clients whose money is pooled.

MRPC 1.15(d)(2) accounts need not be insured by an agency of the federal government because:

  1. The rule on its face does not carry the insurance requirement of MRPC 1.15(d)(1)(C) forward to accounts established under MRPC 1.15(d)(2).
  2. The requirement of MRPC 1.15(a) to confine all trust account deposits to identifiable banks, savings and loan associations, or credit unions, in most cases makes an insurance requirement superfluous for those trust accounts of $100,000 or less.
  3. For those individual client deposits exceeding $100,000, which are those most likely to be segregated pursuant to paragraph (d)(2)(A), requiring multiple accounts in order to obtain complete FDIC (or comparable) coverage would create something of an administrative burden for the lawyer, and might well impair the lawyer's ability to negotiate the best short-term yield for the client's benefit.

Therefore, there is no ethics requirement that trust accounts established under MRPC 1.15(d)(2), while subject to the rules contained in paragraphs (a) through (c), be insured by an agency of the federal government. We do not address the question of whether federal insurance might not be required in a particular case under a lawyer's fiduciary obligation under agency law to protect a principal's investment.



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