OPINION
NO. 9
Maintenance of Books and Records
Repealed: January 26,
2006
[now
Appendix 1 to 2005 MRPC]
Every attorney engaged in the private practice of law must
maintain the books and records described in this Opinion to comply with the
applicable provisions of the Minnesota Rules of Professional Conduct (MRPC)
relating to funds and property received and disbursed on behalf of clients or
otherwise held in a fiduciary capacity.
Equivalent books and records demonstrating the same information in an
easily accessible manner and in substantially the same detail are
acceptable. Books and records may be prepared
manually or by computer.
I. Trust Account Records. The following books and records must be
maintained for funds and property received and disbursed in a fiduciary
capacity, whether for clients or for
others:
1. An identification of all trust accounts
maintained, including the name of the bank or other depository, account number,
account name, date account opened, and an agreement with bank establishing each
account and its interest bearing nature.
A record should also be maintained showing clearly the type of each such
account whether pooled, with net interest paid to the Lawyers Trust Account
Board (IOLTA account), pooled with allocation of interest, or individual,
including the client name. See Rules 1.15(e), (f)(1), and (f)(2),
MRPC.
2. A check register for each trust account
that chronologically shows all deposits and checks.
a. Each deposit entry must include the
date of the deposit, the amount, the identity of the client(s) for whom the
funds were deposited, and the purpose of the deposit.
b. Each check entry must include the date
the check was issued, the payee, the amount, the identity of the client for
whom the check was issued (if not the payee), and the purpose of the check.
3. Subsidiary ledgers for each client
matter for whom the attorney receives trust funds.
a. For every trust account transaction,
attorneys must record on the appropriate client subsidiary ledger the date of
receipt or disbursement, the amount, the payee and check number (for
disbursements), the purpose of the transaction, and the balance of funds
remaining in the account on behalf of that client matter. An attorney shall not disburse funds from the
trust account that would create a negative balance on behalf of an individual
client matter.
b. A separate subsidiary ledger for
nominal funds of the attorney held in the trust account pursuant to Rule
1.15(a)(1), MRPC, to accommodate reasonably expected bank fees and
charges. This ledger should also record
any monthly service charges not offset or waived by the bank in the same month. A separate ledger should be maintained to
record interest accrued but not transferred by the bank to the Lawyers Trust
Account Board in the same month it is credited.
c. An attorney maintaining non-IOLTA
accounts pursuant to Rule 1.15(f), MRPC, shall record on each client subsidiary
ledger the monthly accrual of interest, and the date and amount of each
interest disbursement, including disbursements from accrued interest for costs
of establishing and administering the account.
4. A monthly trial balance of the
subsidiary ledgers identifying each client matter, the balance of funds held on
behalf of the client matter at the end of each month, and the total of all the
client balances. No balance for a client
matter may be negative at any time.
5. A
monthly reconciliation of the checkbook balance, the subsidiary ledger trial
balance total, and the adjusted bank statement balance. The adjusted bank statement balance is
determined from the month-end bank statement balance by adding outstanding
deposits and subtracting outstanding checks.
Sample trial balances and reconciliations are available from
the Office of Lawyers Professional Responsibility.
6. Bank statements, canceled checks or
copies of canceled checks if they are provided with the bank statements, and
duplicate deposit slips. Cash fee
payments must be documented by copies of receipts countersigned by the
payor. All disbursements must be by
check, except when payment by check would be economically imprudent or when
exigent circumstances require a transaction by wire transfer. For withdrawal by wire transfer, an attorney
or law firm must create a written memorandum authorizing the transaction,
signed by the attorney responsible for the transaction. The wire transfer must be entered in the
check register and include all the identifying information listed in paragraphs
I(2)(b) and I(3)(a) of this Opinion.
7. Electronic
Record Retention. An attorney who
maintains trust account records by computer must print and retain, on a monthly
basis, the checkbook register, the trial balance of the subsidiary ledgers, and
the reconciliation report. The checkbook
register must contain all of the information identified in paragraph 2. Electronic records should be regularly backed
up by an appropriate storage device. The
frequency of the back up procedure should be directly related to the volume of
activity in the trust account.
8. A record showing all property,
specifically identified, other than cash, held in trust from time to time for
clients or others, provided that routine files, documents and items such as
real estate abstracts which are not expected to be held indefinitely need not
be so recorded but should be documented in the files of the lawyer as to
receipt and delivery.
II. Business Account Records. An attorney or law firm must maintain at
least one bank account, other than the trust account, for funds and property
received and disbursed outside the attorney’s fiduciary capacity. The following books and records should be
maintained for such accounts:
1. A record in the form of a fees book or
file of copies of billing invoices reflecting all fees charged and other
billing to clients.
2. Copies of receipts, countersigned by
the payor, for all cash fee payments.
3. Check registers, bank statements,
canceled checks, and duplicate deposit slips sufficient to establish the
receipt of earned fee payments from clients, costs advanced on behalf of
clients, and similar receipts and disbursements.
4. A periodic reconciliation of the
checkbook balance and the bank statement balance.
Adopted: September
10, 1976.
Amended:
June 22, 1977, June 23, 1983,
December 4, 1987, September 15, 1989,
September
18, 1998, August 1, 1999, January 27, 2005.
Repealed: January 26, 2006.
1998 Committee Comments
In the 9 years since the Lawyers Professional Responsibility
Board last revised this Opinion, there have been significant changes in the
ways attorneys may maintain their trust account books and records, most notably
the rise of the personal computer and bookkeeping software as essential office
equipment. Moreover, the Director’s
Office has reviewed hundreds of lawyers’ trust accounts since 1990 through the
administration of the overdraft notification program. This experience has given the Director
insight into the most common record-keeping pitfalls and confirmed the types of
records that lawyers must maintain to satisfy their ethical obligations to
protect client funds.
The revised Opinion eliminates the requirement of separate
cash receipts and disbursements journals, in favor of a more detailed
chronological check register that records all trust account transactions,
including the identity of the client and the purpose of the transaction. This simplifies manual record-keeping and
comports with most software packages that allow input of all relevant
information into one computer screen.
Routine monthly printing of hard copies of electronic records
is required to allow reconstruction of trust account records in the event of a
hardware failure. Attorneys should
implement electronic backup procedures depending on the volume of activity in
the trust account. For moderate to high
volume trust accounts, weekly or even daily backups to floppy disks or mirrored
network servers may be appropriate.
Wire transfers may be used for large denomination
transactions provided that the lawyer or law firm creates the proper written
authorization. The Board does not
recommend that attorneys use wire transfers for transactions under $10,000;
checks signed by an attorney remain the primary means of properly disbursing
funds from a trust account.
Related authorities and other resources: Pursuant to Rule 1.15(i),
Minnesota Rules of Professional Conduct (Oct. 2005), is now
Appendix 1 to 2005
Minnesota Rules of Professional Conduct. Brochures entitled:
Instructions for Using
Quicken 5.0 with Windows 95 or Windows 3.1 for Maintaining, Balancing and
Reconciling Minnesota Lawyer Trust Accounts; and
Other People's
Money available from the Office of Lawyers Professional Responsibility; In re Isaacs, 451 N.W.2d 209 (Minn. 1990).