RPC 1.15 - Safeguarding Property

• Proposed Changes to RPC 1.15 - Safeguarding Property (in Word Format)
• No comments are available at this time.

A. Name of Proponent: Washington State Bar Association.

B. Spokepersons:

Bradford E. Furlong, President, Washington State Bar Association, 1325 4^th Avenue, Suite 600, Seattle, WA 98101-2539

Jeanne Marie Clavere, Professional Responsibility Counsel, Washington State Bar Association, 1325 4^th Avenue, Suite 600, Seattle, WA 98101-2539

C. Purpose:

The purpose of the suggested amendment to Comment [3] of RPC 1.15A is to bring the comment into conformity with the reasoning of Washington State Bar Association (WSBA) Advisory Opinions 1202 and 2158 (discussed below) regarding the handling of client funds by lawyers acting in other fiduciary capacities. The WSBA’s Committee on Professional Ethics (CPE) reviewed the advisory opinions and agreed with their analyses and concluded that Comment [3] needed to be clarified.

Washington’s RPC 1.15A describes in detail the rules for safeguarding client property and, in particular, the rules regarding the maintenance of lawyer trust accounts. (RPC 1.15B describes what trust account records must be kept.) The rule and Washington comments were adopted by the Supreme Court in 2006 when it adopted revisions to the RPC.

Comment [3] to RPC 1.15A, in full, reads as follows:

[3] This Rule applies to property held in any fiduciary capacity in connection with a representation, whether as trustee, agent, escrow agent, guardian, personal representative, executor, or otherwise.

The CPE found this comment to be problematic since substantive law outside of the Rules of Professional Conduct controls what fiduciaries are required to do with fiduciary assets. That law imposes prudent investment standards that are inconsistent with RPC 1.15A. See generally RCW 11.100.010-.140.

In 2007, the Rules of Professional Conduct Committee, which was the predecessor to the current CPE, responded to an inquiry by issuing WSBA Advisory Opinion 2158 on the following subject: “How RPC 1.15A applies to monies held as a fiduciary for guardianship and probate matters.” The opinion began by summarizing the inquiry as follows:

The inquiring attorney is appointed as a personal representative or executor in complex and contested estate matters, acts as a director of a guardianship service, and also acts as a professional guardian and trustee. In these capacities, her “routine” is to invest monies in other than [Federal Deposit Insurance Corporation] insured trust accounts under RPC 1.15A, such as “mutual funds” for the purpose of securing a better rate of return on the funds invested. The inquiring party notes that RPC 1.15A, specifically Comment 3, seems to conflict with statutes and case law concerning handling investments when acting in a fiduciary capacity other than as an attorney.

After discussion, WSBA Advisory Opinion 2158 stated:

Comment (3) to RPC 1.15A applies to “property held in any fiduciary capacity in connection with a representation, whether as a trustee, agent, escrow agent, guardian, personal representative, executor, or otherwise”. As such, this does appear to be at odds with the statutes dealing with, for example, guardianships, which vest in the fiduciary the ability to manage assets in a manner in the best interests of the beneficiaries.

Emphasis added. WSBA Advisory Opinion 2158 analyzed the earlier WSBA Advisory Opinion 1202, issued in 1988, dealing with a similar question under the predecessor rule to RPC 1.15A. WSBA Advisory Opinion 1202 stated the question before the committee and its summary conclusion as follows:

Question: When a lawyer holds funds or property in a fiduciary capacity as a trustee, guardian or executor, must those funds be held in a trust account regulated by the requirement of RPC 1.14, and must such property be maintained in conformance with that rule?

Answer: If a lawyer holds funds or property in a fiduciary capacity those funds should not be deposited in a trust account as required by RPC 1.14. The funds or property should be maintained by the standards of a prudent fiduciary under Washington Law.

Washington Advisory Opinion 2158 reaffirmed those earlier conclusions under new RPC 1.15A:

In noting that the duties imposed upon a fiduciary in fact may actually require the fiduciary to invest in assets in such a manner that would not be possible with an interest bearing account established by the lawyer, Informal Opinion #1202 held that a lawyer acting in the capacity of a fiduciary should not deposit funds into the trust account when acting as a guardian or personal representative.

…[A]lthough the wording of RPC 1.15A differs in some respect from the previous RPC 1.14, the intent does not appear to have changed. If so, it is certainly not clearly articulated in the new rule. Further, it poses an interesting question as to whether or not the terms of the Rules of Professional Conduct can in effect override the statutory directives of Title 11, dealing with guardians, trustees, personal representatives, and executors. If the new Rule [i]s intended to replace the functions outlined therein, then a formal opinion should be drafted or the rule revised to clearly state what the responsibility of the attorney is when handling monies in a capacity other than an attorney. It would seem unusual to impose a standard on an attorney to invest monies in a manner less prudent that a non-attorney might be required to do in his/her capacity as a guardian or a personal representative.

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Accordingly, Informal Opinion #1202 still appears to be valid and will control in this case, even though RPC 1.14 has been superseded by the present RPC 1.15A.

Emphasis added.

In conclusion, the suggested revision to RPC 1.15A Comment [3], would clarify the responsibility of an attorney acting in various fiduciary roles.

D. Hearing: A hearing is not requested.

E. Expedited Consideration: Expedited consideration is not requested.

F. Supporting Material: Suggested Rule Amendment