The Revised Safekeeping Rules: What You Need to Know

The Illinois Supreme Court recently announced changes to Rules of Professional Conduct 1.5 and 1.15 that will take effect on July 1, 2023. This overview will focus on the changes to Rule 1.15, particularly those related to the IOLTA program. The Lawyers Trust Fund (LTF) expects that additional information and resources about the changes to both rules will become available from the Attorney Registration & Disciplinary Commission and LTF before July 1.

The most prominent change to Rule 1.15 is that the current rule has been divided into four smaller parts: Rule 1.15, 1.15A, 1.15B, and 1.15C. Each contains provisions drawn from the current rule:

  • Rule 1.15 contains the basic safekeeping requirements.
  • Rule 1.15A contains the recordkeeping provisions found in paragraph (a) of the current rule.
  • Rule 1.15B includes the IOLTA requirements and other provisions related to IOLTA-eligible banks, unidentified funds, and trust account overdraft agreements.
  • Rule 1.15C contains definitions of terms used in Rules 1.15, 1.15A, and 1.15B.

By grouping related concepts together, the reorganized rules should be easier for readers to follow and locate specific provisions.

IOLTA Requirements
The basic requirement that lawyers hold appropriate client funds in an IOLTA account has been carried over from the current rule, but it is now located in its own paragraph (a) at the beginning of Rule 1.15B. Paragraph (a) also states that all client funds must be held in an interest-bearing account – either an IOLTA account or a non-IOLTA client trust account. In paragraphs (a) and (b), the new rule identifies the key determination lawyers must make about where to deposit client funds (whether the client funds are capable of generating net income for the benefit of an individual client) and provides a list of factors to consider in making that determination.

New Rule 1.15B(c) contains provisions formerly part of paragraph (f) that concern financial institutions eligible to hold IOLTA accounts. Eligible banks must pay comparable rates of interest on deposits in IOLTA accounts.

Recordkeeping Requirements
The provisions in new Rule 1.15A detail the requirements related to trust account recordkeeping. Lawyers must maintain client trust account records that meet the specifications of the rule and keep them for seven years. The rule also contains a new requirement that lawyers perform a three-way reconciliation of bank statements, client ledgers, and disbursement journals on no less than a quarterly basis.

Substantive Safekeeping Changes
Rule 1.15 includes several additions that lawyers who handle client funds should keep in mind. First, paragraph (a) in the new Rule 1.15 explicitly prohibits lawyers from using client funds or property without consent. Similarly, new paragraph (g) prohibits cash and cash-related withdrawals from client trust accounts. Several new comments to Rule 1.15 address conversion (Comment [1]); and clarify the nature of the client and third-party funds that are subject to Rule 1.15 (Comment [2]). Additionally, the amended Rule 1.15(c) now states that lawyers may maintain their own funds in a client trust account for the purpose of meeting minimum balance requirements, along with the previously permitted purpose of paying bank service charges.

Electronic Payments
Today’s lawyers frequently use electronic payment platforms to move client funds. For the first time, the new Comments [5] and [6] to Rule 1.15 establish important obligations for lawyers using or considering use of these platforms. Comment [5] states that lawyers must take reasonable steps to ensure that their use of electronic payments won’t result in commingling, risk of loss, or comprised identity of client funds. Comment [5] also requires lawyers to ensure that client funds accepted through electronic means are immediately transferred an IOLTA account or non-IOLTA client trust account. Comment [6] imposes a duty on lawyers to reasonably investigate whether the platform they are using has “appropriate measures” in place to properly handle client funds and maintain client confidentiality.

Other Provisions in Rule 1.15
Rule 1.15B also carries over and stylistically updates provisions regarding unidentified funds (paragraph d) and the requirement that banks notify the ARDC when an attorney trust account is overdrawn (paragraph e).

Fee Provisions in Rule 1.5
The amended Rule 1.5 contains several provisions moved from the current Rule 1.15 related to fees and fee agreements. These include fixed fees and different types of retainer payments, along with extensive comments regarding the Illinois Supreme Court’s holding regarding advance payment retainers in Dowling v. Chicago Options Associates, Inc. 226 Ill. 2d 277 (2007). In a significant change, Rule 1.5 also contains a new prohibition on nonrefundable fees and retainers.

LTF will continue to post and link to new sources of explanation and interpretation of the new rules. If you have a question about the rule changes and how they impact your IOLTA account, please contact a member of LTF’s staff.

  • David Holtermann, General Counsel, via phone (312-938-3076) or email.
  • Terri Smith-Ashford, Deputy Director for Finance & Operations via phone (312-938-3001) or email.

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