Trust Account Rules Interpreted for Today’s Online-First Practice

Here is my recent Daily Record column. My past Daily Record articles can be accessed here.

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Trust Account Rules Interpreted for Today’s Online-First Practice

Practicing law in an “online first” world can be incredibly convenient. Web-based tools enable immediate access to information, instantaneous communication, real-time collaboration, and fast, secure payments. But technology is a moving target. It’s ever-changing as trusted software is updated and new products are released.

It’s not always easy for legal ethics committees to keep up, especially in the age of artificial intelligence. Technology improvements are occurring exponentially, and the tools we used yesterday often look very different from the ones we’ll rely on tomorrow. 

While rapid innovation offers many benefits, it also makes it more difficult to apply past ethics rulings to the latest and greatest technology. Despite these challenges, ethics committees do their best to adapt to the changing times and provide lawyers with much-needed, flexible guidance. 

Case in point: a recent ethics opinion issued by the New York State Bar Association’s Committee on Professional Ethics focused on determining the scope of permissible online payments initiated from a firm’s trust accounts. 

In Ethics Opinion 1281, an attorney sought guidance from the Committee regarding whether the permissibility of making restitution and other court-mandated payments on behalf of his criminal defense clients from his firm’s trust account using the Pay.gov payments portal.  (Online: https://nysba.org/ethics-opinion-1281-payments-from-lawyers-trust-account-pay-gov/).

At the outset, the Committee acknowledged that times were changing and that lawyers, clients, and courts sought “to use payment mechanisms that are quicker, cheaper and more convenient than older methods (such as paper checks).” 

Next, the Committee considered the applicability of Rule 1.15(e), which provides: “All special account withdrawals shall be made only to a named payee and not to cash. Such withdrawals shall be made by check or, with the prior written approval of the party entitled to the proceeds, by bank transfer. Only a lawyer admitted to practice law in New York State shall be an authorized signatory of a special account. (Emphasis added.)” 

The Committee explained that the intent behind this rule, which was adopted in 1990, was to protect the sanctity of trust accounts by ensuring that all cash withdrawals or payments from attorney trust accounts were secure and traceable.  

The Committee also considered the applicability of Rule 1.15(c)(4), which provides “that a lawyer shall promptly pay or deliver to the client or third person the funds…in the possession of the lawyer that the client or  third person is entitled to receive.”

Based on this analysis, it reasoned that although the term “bank transfer” is not statutorily defined, it nevertheless interpreted that term “to include not only wire transfers, but also transfers via the ACH network initiated through Pay.gov.”

The Committee then concluded that as long as the client’s advance written approval is obtained as required by Rule 1.15(e), “a lawyer may make an otherwise proper payment of funds from the lawyer’s trust account in the form of an online payment through Pay.gov.” However, the Committee cautioned that lawyers should avoid setting up automatic withdrawals from trust accounts, since by doing so they risk deducting money from funds belonging to other clients, which could amount to improper conversion of those escrow funds.

It’s encouraging to see ethics committees recognizing the realities of modern practice and updating their guidance to reflect today’s tools. By interpreting long-standing rules in a way that accommodates new technology while emphasizing the protection of client funds, this Committee struck the right balance between innovation and responsibility. This flexible approach ensures that lawyers can confidently embrace convenient, efficient solutions while staying firmly grounded in their ethical obligations.

Nicole Black is a Rochester, New York attorney, author, journalist, and Principal Legal Insight Strategist at 8am, the team behind 8am MyCase, LawPay, CasePeer, and DocketWise.She is the nationally-recognized author of "Cloud Computing for Lawyers" (2012) and co-authors "Social Media for Lawyers: The Next Frontier" (2010), both published by the American Bar Association. She also co-authors "Criminal Law in New York," a Thomson Reuters treatise. She writes regular columns for Above the Law, ABA Journal, and The Daily Record, has authored hundreds of articles for other publications, and regularly speaks at conferences regarding the intersection of law and emerging technologies. She is an ABA Legal Rebel, and is listed on the Fastcase 50 and ABA LTRC Women in Legal Tech. She can be contacted at niki.black@mycase.com.