Can a Washington lawyer place client trust funds in a higher-interest uninsured account with client consent, and must funds over the FDIC limit be split across banks?

Plain-English summary

The inquirer asked two questions about RPC 1.14. First, could an attorney, at the client's direction and with the client's consent, place the client's trust funds in a higher-interest-bearing account that was not federally insured as RPC 1.14 required? Second, when trust-account funds exceeded the FDIC limit (then $100,000), was the attorney required to open multiple accounts to provide full coverage for individual clients?

On the first question, the committee concluded that, per Informal Opinion No. 86-3, the requirements of RPC 1.14(c) are mandatory and cannot be waived by the client. It explained that, under RPC 1.14, trust funds must be deposited in "qualified public depositories," in an interest-bearing trust account at an institution insured by the Federal Deposit Insurance Corporation, the National Credit Union Share Insurance Fund, the Washington Credit Union Share Guaranty Association, or the Federal Savings and Loan Insurance Corporation. The committee concluded that client funds cannot be deposited at institutions lacking the specified insurance unless the institution is a "qualified public depository" as defined, and that client consent does not waive this requirement.

On the second question, the committee concluded that RPC 1.14 does not require multiple accounts in multiple institutions, or otherwise, to guarantee insurance for the full amount of the deposit, so long as RPC 1.14 is followed. The committee stated that it did not opine on other legal requirements such as fiduciary duties, standards of legal negligence, or statutory duties that might apply.

Currency note

This opinion was issued in 2001, before the Washington State Bar Association's adoption of the 2006 revisions to the Rules of Professional Conduct. At the time, Washington's RPC 1.14 governed the safekeeping of client property and trust accounts (the subject of Model Rule 1.15); Washington renumbered these provisions in the 2006 revisions, and the interest-bearing trust-account requirements now appear in RPC 1.15A. The dollar figures and named insurance funds in this opinion reflect the law as it then stood. Treat this page as historical context, not current guidance.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: Can a client consent to placing trust funds in an uninsured higher-interest account?

A: No. The committee concluded that the RPC 1.14(c) requirements are mandatory and cannot be waived by the client; client funds cannot be deposited at institutions lacking the specified insurance unless the institution is a "qualified public depository."

Q: When trust funds exceed the FDIC insurance limit, must the lawyer split them across multiple banks?

A: No. The committee concluded that RPC 1.14 does not require multiple accounts to guarantee insurance for the full amount, so long as RPC 1.14 is followed.

Q: Did the committee address fiduciary or negligence duties tied to large deposits?

A: No. The committee said it did not opine on other legal requirements such as fiduciary duties, standards of legal negligence, or statutory duties.

Background and rules framework

The opinion interprets Washington RPC 1.14 (safekeeping of client property and trust accounts; corresponding to Model Rule 1.15), reading RPC 1.14(c) as a mandatory requirement that client funds be held in insured "qualified public depositories." It relies on the prior Informal Opinion No. 86-3 for the non-waivability point. The opinion reflects Washington's pre-2006 rule numbering, before the trust-account provisions moved to RPC 1.15/1.15A.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.15 / Washington RPC 1.14 (safekeeping of client property; trust accounts, pre-2006 numbering)

Statutes:

• RCW 39.58.010(2) (definition of "qualified public depository"), as quoted in the opinion

Other opinions cited:

• WSBA Informal Opinion No. 86-3: RPC 1.14(c)'s requirements are mandatory and cannot be waived by the client

See also

• WSBA Ethics Op. 1748: Trust Funds of a Missing Client
• WSBA Ethics Op. 917: Missing Client, Trust Funds, and Fees
• WSBA Ethics Op. 994: Selling Client Property to Satisfy a Fee Judgment

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=1197

Original opinion text

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

Advisory Opinion: 1957
Year Issued: 2001
RPC(s): RPC 1.14
Subject: Deposit of client funds in an account not federally insured; trust account funds exceeding FDIC limit of $100,000

The inquirer asked two questions related to the interpretation of RPC 1.14. First, may an attorney, at the direction and with the consent of his client, place trust funds of the client in a higher interest bearing account not Federally insured as required under 1.14? Second, when trust account funds exceed FDIC limit ($100,000.00) is an attorney required to open multiple accounts to provide full coverage for individual clients?

The committee opined in answer to the first question that according to Informal Opinion No. 86-3, the requirements of RPC 1.14(c) are mandatory and cannot be waived by the client. Per RPC 1.14, trust funds must be deposited in "qualified public depositories" and "each trust account referred to in section (a) shall be an interest-bearing trust account in any bank, credit union or savings and load association, selected by a lawyer in the exercise of ordinary prudence, authorized by federal or state law to do business in Washington and insured by the Federal Deposit Insurance Corporation, the National Credit Union Share Insurance Fund, the Washington Credit Union Share Guaranty Association, or the Federal Savings and Loan Insurance Corporation (which is a qualified public depository as defined in RCW 39.58.010(2))." Accordingly, it is the committee’s opinion that client funds cannot be deposited into accounts at institutions lacking the insurance specified in RPC 1.14, unless the institution is a "qualified public depository", as defined. Client consent does not waive this requirement.

As to the second question, the committee opined that RPC 1.14 does not require multiple accounts in multiple institutions or otherwise to guarantee insurance for the full amount of the deposit so long as RPC 1.14 is followed. The committee does not opine on other legal requirements such as fiduciary duties, standards of legal negligence, or statutory duties that may apply to your question.