FACTS[1]
The inquiring attorney is a sole practitioner who is beginning to plan for the winding down of his law practice in the event he dies or becomes disabled. He has a letter agreement with another attorney to assume certain duties in such an event, including the administration of the inquiring attorney's trust account. The inquiring attorney is concerned that the letter agreement may not be legally sufficient to allow the other attorney to disburse funds from the trust account. The inquiring attorney has considered several other means for delegating or transferring authority over the trust account in the event of his death or disability, including granting another attorney a contingent power of attorney, having someone seek the appointment of a conservator under Rule 66 of the Rules of the Supreme Court of Arizona, and including a provision in his will for the disposition of the client trust account by a designated attorney, an attorney retained by the estate's executor, or the Probate Court.
QUESTION PRESENTED The inquiring attorney has asked for guidance as to the preferred method for an attorney to ensure that his clients' financial interests are safeguarded in the event of his or her death or disability.
RELEVANT ETHICAL RULES
ER 1.1 Competence
A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.
ER 1.3 Diligence
A lawyer shall act with reasonable diligence and promptness in representing a client.
ER 1.15 Safeguarding Property
(a) A lawyer shall hold property of clients or third persons that is in a lawyer's possession in connection with a representation separate from the lawyer's own property. Funds shall be kept in a separate account maintained in the state where the lawyer's office is situated, or elsewhere with the consent of the client or third person. Other property shall be identified as such and appropriately safeguarded. Complete records of such account funds and other property shall be kept by the lawyer and shall be preserved for a period of five years after termination of the representation.
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(d) 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 between the client and the third person, 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.
RELEVANT ARIZONA ETHICS OPINIONS None.
OPINION ER 1.15 requires a lawyer to safeguard client property, including client funds, "with the care required of a professional fiduciary." ER 1.15 cmt. a; see also Ariz. Sup. Ct. R. 43-44 (administration of client trust accounts). Consistent with that obligation, it is prudent for a lawyer to develop a plan to ensure that funds in his or her client trust account are properly administered and distributed if the lawyer dies or becomes disabled. See, e.g., ABA Formal Op. 92-369 at 2-4 (December 7, 1992) (consistent with ER 1.1 and 1.3, a lawyer should have a plan in place to ensure that client matters will not be neglected in the event of his or her death).
One means of achieving this objective is to make arrangements to have another lawyer administer the client trust account in the event of the lawyer's death or disability. As noted by the inquiring lawyer, there are a number of different ways a lawyer can consider to accomplish this: (a) entering a letter agreement with another lawyer obligating him or her to assume responsibility over the account in the event of the lawyer's death or disability; (b) pursuant to A.R.S. § 14-5501, et seq., granting another lawyer a contingent power of attorney to administer the account if the lawyer becomes disabled; (c) including a provision in the lawyer's will directing the executor of the estate or some other designee to retain a lawyer to administer and distribute funds in the account; or (d) making arrangements with someone to seek the appointment of a conservator pursuant to Rule 66(a) of the Rules of the Supreme Court of Arizona if the lawyer dies or becomes disabled.
It is beyond the jurisdiction of the Committee to offer an opinion about the legal sufficiency of any of these approaches or about whether a court order is legally required before another lawyer may assume responsibility for a lawyer's client trust account. See Comm. on the Rules of Prof'l Conduct, Statement of Jurisdictional Policies ¶ 6(a) ("The Committee's jurisdiction being limited to the resolution of questions of professional ethics, it will not render opinions . . . [o]n pure questions of law."). But strictly from the perspective of complying with a lawyer's ethical responsibilities, a prudent lawyer should take the following into consideration:
First, a lawyer should choose a means that is not only legally effective, but also fair to, and expeditious for, the clients who are entitled to the funds in the account. That favors identifying and reaching agreement with an identified person who is willing to assume the responsibilities of administering the trust account, and not leaving it to a court at a later date to find a suitable candidate. The lawyer also is ethically obligated to select someone whom the lawyer reasonably believes is competent to discharge those responsibilities. See Ariz. Sup. Ct. R. 43(d) ("Due professional care must be exercised in the performance of the lawyer's duties under this Rule."). Consistent with this requirement, the designee should be a lawyer because the distribution of funds in a client trust account necessarily requires an understanding of, and accountability under, ER 1.15.
Second, a lawyer should plan for both death and disability. Making a provision in a will for the handling of a trust account may satisfy a lawyer's ethical obligations if he or she dies, but such provisions are useless in planning for possible disability. Similarly, granting a power of attorney to another lawyer might be an effective way to anticipate the possibility of disability, but it is an ineffective tool in planning for a lawyer's death because such a power automatically terminates upon the grantor's death.
Third, a lawyer's plans for the disposition of his or her client trust account should be made in concert with a broader plan for the disposition of the lawyer's practice in the event of his or her death or disability. Prudence dictates that arrangements should be made with another lawyer to notify clients of the lawyer's disability or death, and to review the lawyer's files for the limited purpose of determining whether any immediate action needs to be taken to protect those clients' legal interests. See, e.g., ABA Formal Op. 92-369 at 4 (such arrangements do not violate ER 1.6 because they are impliedly authorized in order for the lawyer to carry out a representation).
CONCLUSION
It is beyond the jurisdiction of the Committee on the Rules of Professional Conduct to offer legal advice as to the sufficiency or effectiveness of various legal remedies that may be available to assist a lawyer in planning for administration of the lawyer's client trust account in the event of the lawyer's death or disability. Consistent with a lawyer's obligations under ER 1.15(a), however, a prudent lawyer is well advised to develop such a plan to ensure that his or her clients' interests in the account are adequately safeguarded.
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[1] Formal Opinions of the Committee on the Rules of Professional Conduct are advisory in nature only and are not binding in any disciplinary or other legal proceedings. © State Bar of Arizona 2003