Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

Sign In with Facebook Sign In with Google Sign In with OpenID Sign In with Twitter
Welcome to the LAB! Before you start posting, you should probably take a moment to read our posting guidelines. (You can dismiss this message by clicking the X in the corner.)

Abandoned trust funds

samgloversamglover Minneapolis, MN
I have $42.63 in my trust account that consists of three checks, all over a year old, that my clients have apparently never deposited.

What do I do with these? At some point, can I give the money to charity, or something? Can I at least transfer it to my operating account and worry about it if the clients ever come looking for the money?

Comments

  • It will depend on your state's trust account guidelines. In North Carolina you have to maintain the funds until the client either claims it or until the passage of time (6-7 years is my recollection) when the money escheats to the state treasury. Then the person can claim through abandoned property with the treasury. You cannot give it to anyone else. You cannot transfer it to the operating account unless you have prior permission from the client to apply such funds to an outstanding account balance. It's the client's money, period.

    I would think regardless of what state you practice in, you should make an effort to contact the client and see if they actually received the check and if they did remind them to cash it. Sometimes they just didn't see the importance of cashing a small sum check. I have explained to clients the tracking nightmare of maintaining a trust account, which usually gets them to cash the check. I also had one client tell me that she hadn't opened any of her mail for the last two months, but she would go through the mail and find the check. Thankfully she did just that!
  • [Sam- I read your post assuming that you sent the clients checks but the clients never deposited them].

    (1) I would send certified letters to each of the clients to alert them of same.

    (2) Review your state's Rules of Professional Responsibility regarding Safekeeping Client Property- (Texas Rule 1.14)- and the Comments which might address some of your concerns. Texas says that the lawyer holds the money as a fiduciary and should retain client funds until five years after the end of the representation. 

    (2) If no responses to your client inquiries, review the state procedures regarding unclaimed property and send the monies there after that five year period- or whatever your Rules of Professional Responsibility dictate. (e.g., Texas has a Comptroller of Public Accounts which receives and administers unclaimed property). I would not donate the money to charity.

     

    Seems like a lot of work for $42.63- but your fiduciary responsibilities seem to require it.
  • Sam, if it's anything like Australia once you've made a number of attempts to contact the owner of the funds and they haven't responded you'd forward the funds to the relevant Government entity that deals with unclaimed funds. I had a quick look and it looks like the Minnesota department of Commerce deals with this - http://mn.gov/commerce/topics/Unclaimed-Property/Background.jsp
  • I honestly can't answer for Minnesota, but in Australia you would be in some trouble.  You cannot deal with Trust funds without authority from your client.

    In practice, there are several ways to do that.  The first is to give the money to your client.  Obviously, in your case, that hasn't worked.

    The next is to send them an invoice for work done.  IE, if you charge for letters, charge them for each letter you sent them trying to convince them to cash their cheques.  In Australia, you must wait three full business days after sending an invoice before you can transfer money from trust to office account.  This, in theory, gives the client time to object to the invoice before the money is transferred. 

    We are also unable to deal with trust money by cash... it has to be eft or cheque. 

    We also have a central trust fund - any balances in your trust account over a set amout ($10,000 I think) have to be transferred to the central trust fund - the interest from this fund supports the Legal Compensation Scheme (or something like that... for when Lawyers rip off their clients.)

    Just a quick note... cheques under $50.00 don't get cashed, as a rule. 

    Cancel the cheques you have sent, (if they are a year old, they should expire anyway) and perhaps even request the client put more money in trust so you can send them a cheque for OVER $50 - that might get cashed.  We make it a rule never to have an amount less than $50 in trust, if there is any chance the money will need to go back to the client. 

    Please note that this is not legal advice, and is almost certainly wrong in the US, :D
  • If you were in Oregon in the good ol' USA, you wait the requisite period of time and then send the funds off to the Division of State Lands to be held until someone shows up to claim them, and if no one shows up,
    DSL uses the income from the funds to support the schools.

    bob
  • Here's what our accounting guru says:

    "That’s a good question without a real good answer.  Here is my understanding of the trust account activity.  Because it is a client’s funds and not the attorneys it will always rightfully be theirs.  Even if they didn’t cash the checks, it is rightfully theirs. 

    In this instance I would void the check and reissue to the receiver, as they are a year old they probably do not need to stop payment the check because they are aged past a period to be cashed.  You would want to confirm with the bank if a stop payment of the original check is required. 

    Also, I would contact whatever state bar association they are a part of on how to handle “aged outstanding trust checks”  or “stale checks.”  Typically the bar association will either make you keep that money in there until the account is closed or the business is closed and/or distribute the funds to the state bar association. 

    It stinks that they have to maintain such a small amount in the trust account and can’t clear it out, but it’s no different than a retirement account at any firm, until funds are distributed they will remain in the account accruing interest.  Granted retirement accounts have thresholds for automatic disbursement, I would still be hesitant to take action without the state bars consent."

  • samgloversamglover Minneapolis, MN
    I've tried contacting these clients, but haven't gotten any response. I guess I'll try again and see if they still have the checks, or not. If so, I'll ask them to deposit the checks.

    If not, it presents an interesting conundrum. I'm not comfortable simply voiding the checks, as my clients are probably likely to deposit the old checks if they ever find them—out of absent-mindedness, if nothing else. If I stop payment, the expense should obviously be borne by the client who lost the check, but that will eat up the funds of two of the three clients. Which solves the problem, but with no benefit to the client.
  • Don't cheques become stale after a year and need to be re-issued anyway?
  • samgloversamglover Minneapolis, MN
    I don't think so. I remember asking at one point, because I had a check from a client that I kept trying to cash for a few years. The bank said there was no expiration date on checks, although you can't cash them after a 30 or 90 days or something.
  • Make an effort to get the clients to cash the checks. If the amount was over $100, you could turn the funds over to the MN Dept of Commerce after 3 years. Less than $100 is more gnarly. Hold them another 2 years and then call me.
Sign In or Register to comment.