North Carolina State Bar Ethics Opinions
Free plain-English summaries of legal ethics opinions issued by the North Carolina State Bar, with full citations and source links on every page.
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When a North Carolina lawyer sells or closes a law practice, who must be notified, what happens to old client files and original documents, and when can files be destroyed?
Under Rule 1.17, the seller must notify current clients and former clients whose files transfer, return or safeguard original documents of legal significance regardless of age, may destroy ordinary fi…
What are a North Carolina lawyer's duties when a debt-collection matter shows signs of a counterfeit-check scam, and what happens if the lawyer disburses trust funds against a fake check?
A lawyer who ignores the red flags of a counterfeit-check scam and disburses against the check violates the duties of competence and diligence, misappropriates other clients' trust funds, must replace…
What must a North Carolina settlement lawyer do to guard against wire fraud, and is the lawyer responsible when a client wires closing funds to a fraudster?
A lawyer who serves as a settlement agent must educate himself and staff about real estate wire fraud, implement reasonable safeguards, and clearly communicate the risks and safe transfer instructions…
Can a North Carolina lawyer accept Bitcoin or other virtual currency as a legal fee, and can the lawyer hold a client's virtual currency in trust?
A lawyer may accept virtual currency as an earned flat fee if the fee is not clearly excessive and the lawyer complies with Rule 1.8(a) (treating it as a business transaction with the client), includi…
When a North Carolina lawyer serves as executor or otherwise handles an estate account, when do the Rule 1.15 trust-accounting rules apply and what reviews are required?
Rule 1.15 governs an estate account to the extent the lawyer controls it. A lawyer with signatory authority must run it as a designated fiduciary account and perform the monthly and quarterly reviews;…
If a client tells a North Carolina lawyer not to pay a medical provider out of settlement funds, may the lawyer disburse those funds to the client instead when the provider has a perfected statutory lien?
No, if the lien is perfected. A perfected statutory medical lien means the client is not currently entitled to the disputed funds, so the lawyer must segregate and retain them, and must pay the provid…
If a third party steals from a North Carolina lawyer's trust account through counterfeit checks, hacking, or a spoofed wire request, must the lawyer replace the stolen client funds?
It depends on whether the lawyer used reasonable care. A lawyer who kept the trust account in substantial compliance with Rule 1.15 and reasonable security measures is not professionally required to r…
If a client tells a North Carolina closing lawyer to stop the deal after the deed is recorded, must the lawyer still disburse the closing funds?
Yes. Once the deed is recorded and title has passed, the closing lawyer must satisfy the seller's conditions on delivery of the deed by disbursing the sale proceeds, even if the buyer-client says stop…
When a client leaves, what electronic records must a North Carolina lawyer hand over, and in what format?
Under Rule 1.16(d) the lawyer must surrender everything in the file the client is entitled to and that would help successor counsel, and electronic records are treated the same as paper. Using legal j…
Can a North Carolina lawyer disburse against funds credited to the trust account by ACH or EFT before the transfer is final?
Yes. ACH and EFT transfers are designed to make funds available immediately, like wired funds, and the risk of reversal is slight, with notice to the lawyer in time to act. A lawyer who learns of a re…
When a firm lawyer is disbarred (or suspended, disappears, or dies), what duty do the remaining lawyers have to safekeep and return that lawyer's client files?
The remaining lawyers are responsible for safekeeping and properly disposing of both the active and closed client files of the departed lawyer in their custody, and may not turn closed files over to a…
When a North Carolina lawyer collects money from a client to pay a third-party expense like a court reporter, must the money go into the trust account?
Yes. Money a client gives a lawyer to pay a third party in connection with legal services is entrusted property and must be deposited in the trust account, regardless of who is contractually obligated…
Can a North Carolina law firm use online banking to manage its client trust account given the duty to safeguard client funds?
Yes. The opinion concludes a law firm may use online banking to manage a trust account if it can meet the Rule 1.15 fiduciary and recordkeeping requirements, including the Rule 1.15-3(b)(3) records fo…
Can a North Carolina law firm use cloud-based 'software as a service' to store and manage client files and data?
Yes. The opinion concludes a law firm may use software as a service (SaaS), where client data is stored on a vendor's remote servers, if it takes reasonable care to minimize the risk of inadvertent or…
Can a North Carolina lawyer keep disputed legal fees in the trust account when the client demands return of entrusted estate funds?
No. The opinion concludes that funds entrusted to a lawyer to be safeguarded or managed, and not designated as payment of a fee, may not be held in trust as 'disputed' funds under Rule 1.15-2(g); the …
Can a lawyer deliver or manage client files through a password-protected website instead of on paper?
Yes. A lawyer may upload closing documents to a secure website and email the client a password to download them, and may use a web-based management system that gives clients online access to their own…
Can a lawyer charge a dormancy fee against a client's unclaimed funds left in the trust account?
Yes, with conditions. The opinion concludes a lawyer may charge a dormancy fee against unclaimed trust funds if the client received prior notice of the fee and gave written consent, the amount is appr…
Can a lawyer disburse settlement funds from the trust account against an insurance check before confirming it has been collected?
Only with reasonable due diligence and a backstop. The opinion concludes that a lawyer may disburse immediately against cash, wired funds, or instruments listed in the Good Funds Settlement Act, but f…
How must a lawyer safeguard the confidential health information of clients and opposing parties, given HIPAA?
The opinion concludes that health information a lawyer acquires during a representation is confidential under Rule 1.6, and that the standard of care is reasonable care under the circumstances rather …
Can a North Carolina real estate firm hold recording and courier costs in a separate non-trust account and keep the markup if actual costs come in lower?
Only with safeguards. The opinion concludes that funds collected at a closing to pay recording and courier costs remain client funds until disbursed, so a 'Recording Account' holding them must be a tr…
Can a personal injury lawyer give medical lienholders an accounting of how settlement proceeds were disbursed?
Yes. The opinion concludes that a lawyer does not violate the confidentiality rule by providing medical lienholders the accounting that N.C.G.S. 44-50.1 requires, because Rule 1.6(b)(1) permits disclo…
Does a bank-supplied CD-ROM of digital check images satisfy a North Carolina lawyer's trust-account record-keeping requirement?
The opinion concludes that a CD-ROM containing digital images of the fronts and backs of canceled checks satisfies Rule 1.15-3(a)(2), because the images can be retrieved and printed when needed; it al…
If a personal injury client tells the lawyer to pay her all the settlement money but a medical provider has a letter of protection or an assignment, must the lawyer pay the client?
Only if there is no valid lien or assignment. If the lawyer gave the provider an authorized letter of protection and the client later disputes payment, the lawyer holds the contested portion in trust …
Can a North Carolina lawyer disburse a personal injury settlement from the trust account before the insurance check has actually cleared?
Generally no. The opinion concluded RPC 191 applies to all trust disbursements; a lawyer may disburse against provisional credit only for the limited instrument types in the Good Funds Settlement Act,…
Can a North Carolina lawyer sign a statement acknowledging a finance company's assignment of part of a personal injury client's recovery and agreeing to pay it from the proceeds?
Yes, with conditions. The opinion concluded a lawyer may acknowledge a valid assignment if it does not compromise independent judgment, the acknowledgment preserves the client's instructions where the…
If a buyer tells the closing lawyer to stop after the deed is recorded, can the lawyer withhold the seller's funds in North Carolina?
The opinion concluded that once the closing lawyer records the deed and title has passed, the lawyer must satisfy the conditions of the transfer by disbursing the sale proceeds to the seller despite t…
Can a North Carolina closing lawyer who serves as escrow agent agree in advance to represent the buyer if a dispute over the escrow arises?
The opinion concluded that an escrow agreement may provide that, if a dispute arises, the lawyer-escrow agent turns the funds over to a successor escrow agent and then represents the buyer; and a clie…
What must a North Carolina lawyer do to protect trust-account funds from a year 2000 computer failure at the bank?
The opinion concluded that a lawyer's fiduciary duty to safeguard client funds requires exercising due care in selecting a depository bank, including considering how the bank has addressed the year 20…
Can a lawyer charge a former client for the cost of pulling a closed file out of storage?
Yes, with conditions. The opinion concluded a lawyer could charge the actual cost of retrieving a closed file only after timely notifying the client of the storage and retrieval-charge arrangement, an…
What can a North Carolina lawyer holding escrowed closing funds do when the buyer and seller dispute whether the money should be released?
The opinion concluded that a lawyer acting as escrow agent must be impartial to both parties and carry out the escrow terms; if the lawyer cannot determine that the condition for release has been met,…
Can a North Carolina lawyer accept credit card payments into a trust account when the bank's merchant agreement lets it charge back the account without notice?
The opinion concluded a lawyer may accept credit card payments subject to a chargeback only if other clients' trust funds are protected (by debiting a non-trust account or a dedicated trust account), …
When a North Carolina law firm closes a real estate file, what must it give the former client, and are the lawyer's title notes part of it?
A former client gets originals or copies of the documents generated solely for the client's closing, but not the lawyer's title notes or abstracts. If the lawyer who made the notes leaves the firm and…
How should a North Carolina lawyer handle fee payments received by electronic transfer or credit card when the bank can deposit them into only one account?
Because the bank cannot split a transfer between earned and unearned fees, all electronic-transfer payments should go into the trust account, with earned fees withdrawn promptly. The lawyer may pass t…
Can a North Carolina law firm scan a client's paper file into electronic format and destroy the paper originals before the retention period ends?
Yes, a firm may convert paper documents to electronic storage and destroy the paper file, provided original documents with independent legal significance (wills, contracts, stock certificates) are cul…
If a lawyer receives a check and cannot tell whether it belongs to a client, a third party, or the firm, can the firm treat it as its own and divide it with the other payee?
Yes. The opinion concluded that the firm may treat such a check as not belonging to a client or third party and share it, but only after a reasonable investigation leaves the firm with a good-faith be…
How long must a North Carolina lawyer keep closed client files, and how can they be destroyed?
A closed file must be kept at least six years after the representation ends unless the client consents to earlier destruction, and any destruction must preserve client confidentiality. The opinion set…
Can a closing lawyer disburse from the trust account against deposited checks that have only been provisionally credited, before they actually clear?
Yes, but only against the reliable financial instruments the Good Funds Settlement Act specifies, and the lawyer must immediately cover any dishonored item from sources other than other clients' funds…
Can a lawyer let the bank 'link' a trust account and a business account so that credits and service charges offset across both?
The opinion concluded that a linked arrangement creates ethical problems because it makes it impossible to account for each account's interest and charges separately, so trust-account 'credits' could …
What can a lawyer do with a client's uncashed trust-account refund check, and can the lawyer set a fixed criminal-defense fee from the leftover after paying fines and costs?
The opinion concluded that a lawyer may not stop payment on an uncashed refund check and give the money to charity without the client's consent; the lawyer must try to reach the client and, failing th…
Can a law firm take an assignment of a client's judgment as payment or security for fees while it is still handling the appeal of that judgment?
The opinion concluded that a firm may not take an assignment of a client's judgment while it is conducting the appeal of that judgment, because Rule 5.3(a) bars a lawyer from acquiring a proprietary i…
When a lawyer sends a settlement check to opposing counsel 'in trust' on the condition that release documents be signed first, is the sending lawyer a client, and what happens if the receiving lawyer breaks the condition?
The opinion concluded that opposing counsel who receives a conditionally delivered settlement check is not the sending lawyer's 'client' under Rule 10.1(b)(4) and owes no accounting. By accepting the …
When a client tells the lawyer to pay all settlement proceeds to her and not the medical providers, must the lawyer follow the client or honor the medical-lien statute?
The opinion concluded that, under RPC 69 and Rule 10.2(e), a lawyer must disburse settlement funds as the client instructs in the absence of a valid lien, and this is so whether the case settles befor…
How long must a lawyer hold a missing client's trust funds before treating them as abandoned and paying them to the state escheat fund?
The opinion concluded that a lawyer must hold a known but unlocatable owner's trust funds and treat them as abandoned, payable to the state treasurer, only after a five-year period in which the princi…
At a real estate closing, must the attorney collect all earnest money in certified funds and handle every dollar, and can the buyer's lawyer charge the seller a fee?
The opinion concluded that a closing attorney need not collect earnest money in certified funds and may disburse against provisionally credited funds when virtually certain the deposit will clear and …
Can a closing attorney hand the real estate agent the commission and seller-proceeds checks 'in trust' before recording the documents and depositing the funds?
The opinion concluded that a closing attorney may not deliver trust account checks to a real estate agent, even 'in trust' or conditionally, until the attorney has recorded the closing documents and d…
When a client stops responding, can the lawyer take a fee and pay a doctor's lien out of the client's trust funds without the client's direction?
The opinion concluded that a lawyer may not take a fee from a client's trust balance or pay a doctor's lien out of it without the client's direction. The trust-account rule requires the lawyer to pay …
After a settlement, must a lawyer pay the client's medical providers directly, or follow the client's later instruction to pay the client instead?
The opinion concluded that a lawyer must disburse settlement proceeds as the client directs and so must pay the client directly when instructed, unless a medical provider has perfected a valid physici…
When a builder will not cure punch-list items, can the closing attorney holding the construction escrow disburse the funds to the purchaser alone after notice and a waiting period?
The opinion concluded that a lawyer acting as escrow agent holds the funds in trust for all parties and may not, acting with only one party, disburse them to that party; where the escrow agreement doe…
Can a law firm treat a single all-inclusive fee as earned, deposit it all in its general account, and pay litigation costs from there if the client agreed in writing?
The opinion concluded no: part of an all-inclusive 'fee' that is really intended to cover litigation costs is an entrustment, and the trust-accounting rules require funds received in a fiduciary capac…
When a law firm dissolves, what duties do the principals owe to clients and to each other?
The opinion concluded that dissolving lawyers must continue serving clients until matters conclude or withdrawal is permitted, notify clients in a way that preserves their free choice of counsel, deal…
Can a lawyer skip the trust account for a small recording fee by depositing the client's single check for the fee and recording cost into the general account?
The opinion concluded that all funds received as a fiduciary must go into the trust account no matter how small, but a lawyer may avoid an intermediate trust deposit by advancing the recording cost fr…
Can a closing attorney disburse loan proceeds before recording when the realtor and seller demand it, even though the lender's instructions require recording first?
The opinion concluded that the attorney may not ignore the lender's instruction that recording precede disbursement: the lender is the attorney's client, the trust rules require disbursing entrusted f…
Can a firm holding a client's refunded appeal-bond money in trust keep it to satisfy unpaid fees the client owes?
The opinion concluded that the firm may not apply the refunded appeal-bond funds to unpaid fees unless its agreement with the client authorizes taking fees from funds held for the client, because trus…
Can a lawyer personally bid on and buy a client's property at an execution sale when no other bidders appear?
The opinion concluded that the lawyer may not bid as a matter of course, but may do so if he first obtains the client's informed consent and reasonably believes his personal interest will not adversel…
Can a public defender do favors for jailed clients like cashing or buying money orders, and must client funds pass through a trust account?
The opinion concluded that nothing prohibits an attorney from doing such favors for clients, but money received from a client or for delivery to a client must be deposited into a trust account and dis…
Can a real estate lawyer disburse from the trust account at closing before the lender's out-of-state draft has cleared, relying on other clients' funds as float?
The opinion concluded no; the lawyer may not use the float of other clients' funds to cover a lender's uncollected draft, because if the draft fails the other clients' money is put at risk, though dis…
When a custody case ends, may the lawyer give the client copies of Department of Social Services home studies in the file, including one stamped confidential for court use only?
The opinion concluded that yes, unless a judge orders otherwise, the lawyer should release the home studies, because a discharged lawyer must turn over the papers the client is entitled to and no stat…
Must a lawyer who handled an indigent defendant's criminal appeal give the client the State-supplied trial transcript after the appeal ends?
The opinion concluded that yes, if the client wishes it, the lawyer must turn over the transcript, because the right to the transcript belongs to the defendant, not the lawyer, and a lawyer must promp…
When a foreclosure that started uncontested becomes contested at the hearing, what must the lawyer-trustee do, and can his firm or staff take a side?
The opinion concluded that the lawyer-trustee must act as a neutral fiduciary for both parties; while he is trustee no member of his firm may represent the petitioning party, and a lawyer whose firm s…
If a foreclosure becomes contested, can the attorney-trustee resign, have the lender appoint a substitute trustee, and then represent the lender in the foreclosure?
The opinion concluded that the attorney may represent the lender in all further foreclosure proceedings after resigning as trustee and the lender appoints a substitute, so long as the attorney has no …
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Legal ethics opinions from the North Carolina State Bar interpret the rules of professional conduct for working lawyers, in response to inquiries from members and committees. They are not binding like court discipline decisions, but courts and discipline boards treat formal opinions as substantial guidance on how the rules apply. Every opinion above has a plain-English question and short answer, plus a link to the original source on the bar's site.