January 19, 1994
In the establishment of client trust accounts, a lawyer shall use reasonable care in selecting financial institutions which offer favorable interest rates and which minimize service fees or other charges against such client trust accounts.
References: MRPC 1.15; R-7.
MRPC 1.15 requires the establishment of client trust accounts under various circumstances with respect to funds of a client which come into the possession of the lawyer. The inquirer poses the following question: What duty, if any, does a lawyer have to "shop" among financial institutions for the rates most beneficial to clients when establishing trust accounts?
MRPC 1.15 governs the establishment of client trust accounts. The requirements of MRPC 1.15, as amended in 1990, were exhaustively reviewed in R-7.
In R-7 it was stated in part:
"Because a lawyer has a fiduciary duty to preserve and increase assets held in trust, the lawyer should patronize depository institutions which provide needed services at rates most advantageous to the client."
Consistent with this fiduciary duty, a lawyer should use reasonable care to select financial institutions which provide favorable interest rates on client trust accounts and which minimize service fees and other charges against such accounts.
The standard of care required, however, is the same as any fiduciary under like circumstances. This duty is to use reasonable care to protect and preserve the assets of the client.
Consistent with this fiduciary duty, the lawyer is not obligated to "shop" financial institutions to secure to "most beneficial" rate available. Rather, the lawyer should use reasonable care to select financial institutions which provide favorable interest rates on client trust accounts.
It should be noted that numerous financial institutions within the state of Michigan have agreed not to charge any service fees on IOLTA Trust Accounts. The list of participating financial institutions is published periodically by the Michigan State Bar Foundation in the Michigan Bar Journal (see, e.g., November 1993, p 1233). Consistent with the lawyer's duty to exercise reasonable care, the lawyer should consider utilizing financial institutions which waive or minimize such service fees or charges to IOLTA and other trust accounts.
A lawyer in possession of funds belonging to a client occupies the role of fiduciary with respect to such funds. Consistent with that fiduciary duty, the lawyer must exercise reasonable care to deposit such funds in financial institutions which provide favorable interest rates and which minimize service fees and other charges to such accounts. The lawyer is not, however, required to continually search for financial institutions which provide the overall highest rate of return. Rather, only reasonable care under the circumstances is required.