What should a lawyer do with money held in trust for a former client the lawyer can no longer locate?

Plain-English summary

The Committee was asked what procedure an attorney should follow when the attorney holds money in trust for a former client who cannot be located. The opinion concluded that the attorney may, after exhausting reasonable efforts to locate the client, hold the funds in trust for the requisite period and then dispose of them as abandoned property under Alaska's unclaimed-property statute, AS 34.45.110 through .780.

The opinion framed the situation against the attorney's underlying duties regarding client property and communication. It cited DR 9-102(B) of the Code of Professional Responsibility, which requires a lawyer to promptly notify a client of receipt of funds, to identify and safeguard client property, to keep complete records and render accountings, and to promptly pay or deliver funds the client is entitled to receive. It also discussed the duty to communicate, noting the then-pending Rule 1.4(a) (keeping a client reasonably informed) and Rule 1.15(b) (prompt notice and delivery of funds in which a client or third person has an interest), and observing that the duty to communicate encompasses informing a client of an expectation that funds will be received in the future.

The opinion offered two recommendations to reduce the chance of holding funds for an unlocatable client: that attorneys notify clients by written statements at regular intervals of client funds remaining on deposit, and that, absent a written retainer agreement, funds held to secure payment of fees or costs for anticipated future representation be returned when no client matter is pending and no services have been performed during the preceding sixty days.

Currency note

This opinion was issued in 1990, before the Alaska Bar Association's adoption of the 2009 revisions to the Alaska Rules of Professional Conduct (and before Alaska adopted the Rules of Professional Conduct at all; it applies the former Code of Professional Responsibility and refers to a version of the Model Rules then only pending before the Alaska Supreme Court). Subsequent rule amendments or later opinions may have changed the analysis, and the cited unclaimed-property statute may have been amended. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: What can a lawyer do with trust money for a client who has disappeared?

A: The opinion concluded the lawyer may hold the funds in trust and, after exhausting reasonable efforts to locate the client, dispose of them as abandoned property under AS 34.45.110-.780.

Q: Could the lawyer keep or write off the funds instead?

A: No. The opinion treated the money as the client's property subject to DR 9-102(B), to be safeguarded and ultimately turned over under the unclaimed-property statute, not retained by the lawyer.

Q: What steps did the opinion suggest to avoid this situation?

A: The opinion recommended sending clients written statements at regular intervals showing funds on deposit, and, absent a written retainer agreement, returning fee or cost advances when no matter is pending and no services have been performed in the preceding sixty days.

Background and rules framework

The opinion applied DR 9-102(B) of the former Alaska Code of Professional Responsibility, the safekeeping-of-property rule analogous to Model Rule 1.15, and discussed the communication duty reflected in the then-pending Model Rules 1.4(a) and 1.15(b). It read those duties together with Alaska's unclaimed-property statute, AS 34.45.110-.780, which governs the disposition of abandoned property.

Citations and references

Rules of Professional Conduct (former Code; cf. Model Rules):

• DR 9-102(B) (safekeeping and delivery of client property) (cf. Model Rule 1.15)
• Pending Alaska Rules 1.4(a) (communication) and 1.15(b) (notice and delivery of funds)

Statutes:

• AS 34.45.110-.780 (Alaska Uniform Unclaimed Property Act)

Cases:

• Mason v. Balcom, 531 F.2d 717 (5th Cir. 1976), duty to communicate with a client

See also

• AL Ethics Op. 1988-92: Unclaimed Client Trust Funds Escheat
• Alaska Ethics Op. 92-3: Third-Party Claims to Client Funds
• AL Ethics Op. 1990-48: Interplead Disputed Trust Funds

Source

• Landing page: https://alaskabar.org/ethics-discipline/ethics-opinions/adopted-ethics-opinions-chronological/
• Original PDF: https://alaskabar.org/wp-content/uploads/90-3-corr.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

ALASKA BAR ASSOCIATION
ETHICS OPINION 90-3
Disposition of Funds Held by a Lawyer
For a Client Who Cannot be Located
The Committee has been requested to give an opinion as to the proper
procedure to be followed by an attorney who is unable to locate a former client
for whom the attorney is holding money in his trust account.
It is the opinion of the Committee that the attorney may, after exhausting
reasonable efforts to locate the client, hold the funds owing to that client in a
trust account for the requisite period of time, and then dispose of the funds as
abandoned property pursuant to AS 34.45.110 - .780.
The application of other provisions of the Code of Professional
Responsibility should make the situation addressed in this opinion a less
frequent occurrence. Rule 1.4(a) of the Rules of Professional Responsibility,
which are pending before the Alaska Supreme Court, specifically provides that
"A lawyer shall keep a client reasonably informed about the status of a matter
and promptly comply with reasonable requests for information." While there is
no express counterpart under the Model Code, the obligation of an attorney to
communicate with the client has historically been recognized based on other
express duties, such as the duty to exercise reasonable care, skill, and
diligence. Mason v. Balcom, 531 F.2d 717 (5th Cir. 1976). The duty to
communicate with a client encompasses the obligation to inform the client of
any expectation that funds will be received at a future time that will be payable
to the client.
DR 9-102(B) imposes on attorneys specific obligations with regard to client
property. That rule provides:
(B)

A lawyer shall

(1)
Promptly notify a client of the receipt of his funds, securities,
or other properties.
(2)
Identify and label securities and properties of a client
promptly upon receipt and place them in a safe deposit box or other place
of safekeeping as soon as practicable.

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(3)
Maintain complete records of all funds, securities, and other
properties of a client coming into the possession of the lawyer and render
appropriate accounts to his client regarding them.
(4)
Promptly pay or deliver to the client as requested by a client
the funds, securities, or other properties in the possession of the lawyer
which the client is entitled to receive.
Rule 1.15 (b) of the pending Model Rules modifies the duty of disbursing
funds, to require that they be disbursed promptly unless delay in payment is
authorized. That Rule states:
(b)
Upon receiving funds or other property in which a client or
third person has an interest, a lawyer shall promptly notify the client or
third person. Except as stated in this Rule or otherwise permitted by law
or by agreement with the client, a lawyer shall promptly deliver to the
client or third person any funds or other property that the client or third
person is entitled to receive and, upon request by the client or third
person, shall promptly render a full accounting regarding such property.
To minimize the possibility that an attorney will be placed in the position
of holding funds for a client who cannot be located the Committee
recommends, in addition to compliance with the mandates of the Code of
Professional Responsibility, that attorneys notify clients, by written statements
at regular intervals, of client funds remaining on deposit with the lawyer. The
Committee also recommends, in the absence of a written retainer agreement,
that any funds held by a lawyer to secure payment of fees or costs that might
be incurred in anticipated future representation be returned to a client when
no current client matters are pending and no services have been performed for
the client during the preceding sixty days.
Approved by the Alaska Bar Association Ethics Committee on May 17, 1990.
Adopted by the Board of Governors on September 7, 1990.

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