Should You IOLTA Trust Your Lawyer?
Trust comes up a lot in any professional relationship, but especially in lawyer-client relationships. For good reason, clients place enormous trust in their lawyers, often during very trying and traumatic times. I would argue that if you don’t trust your lawyer, you need to find one you do trust.
There are legal rules in place to help make sure you can trust your lawyer with your money. Specifically, lawyers in Illinois are required by Rule 1.15 of the Illinois Rules of Professional Conduct (IRPC) to maintain IOLTA trust accounts, which are interest-bearing accounts used for specific purposes. The interest is “donated” to the Lawyers Trust Fund (LTF), which helps legal aid organizations.
In case you haven’t had enough with acronyms, IOLTA stands for Interest on Lawyers Trust Accounts.
What is it For? How Does it Work? Why Does it Matter?
Lawyers cannot combine their clients’ funds with their own; they must keep completely separate any funds that ultimately belong to their clients from any of their own money. Many lawyers hold funds that belong, technically, to their clients. These include retainers that the attorney has been paid, but has not yet earned.
The required separation is accomplished by keeping all client funds in the lawyer’s trust account. There are some rules that apply to an IOLTA account:
- The account MUST ALWAYS balance
- The lawyer must keep detailed records of every trust account and records of all deposits and withdrawals for every single client
- Any time a trust account balance drops to negative, it is automatically reported to the Illinois Attorney Registration & Disciplinary Commission (IARDC). This can lead to the attorney being disciplined, or possibly even disbarred
- A lawyer can never “float” money to a client—the trust account funds must be available prior to a lawyer disbursing money to that client
Why would a lawyer have client money anyway? How does this work? Give me an example.
Let’s say client, Cindy, has an auto crash injury case where she has hired lawyer Larry to handle. She agrees to pay Larry 1/3 of the gross settlement or verdict plus reimburse him for any costs he advances. Larry settles Cindy’s case for $90,000. Larry’s fee is $30,000, his costs were $1,000, so, assuming no unpaid medical bills or liens, Cindy would receive $59,000.
How would that work in real life?
Larry would receive a check payable to BOTH Larry Lawyer and Cindy Client from the insurance company for $90,000. Larry and Cindy would both have to endorse that check, and then Larry would have to deposit it into his IOLTA trust account. Once that money cleared (usually about a week), Larry could make distribution of the proceeds to Cindy (and his fees & costs to himself).
Another example might be a real estate closing. There may be a dispute about how much of a credit the buyer should receive for the faulty hot water heater. The lawyer might agree to hold a portion of the seller’s proceeds—$2,500—in her IOLTA trust account until such time as the parties can agree on how much of that money the buyer should receive.
If you are dealing with a lawyer promising that she can settle your case today and give you a check tomorrow, you are dealing with a dishonest lawyer. Most likely, this attorney is “robbing Peter to pay Paul,” in that she is taking money from her other clients to pay her current client. This is unethical and wrong and should never occur.
There are some limited situations where a lawyer may lend a client “expenses of living,” but, in general, if a lawyer is giving you money as an “advance” that is a bad thing.
Other warning signs would be a lawyer who never has you sign the settlement check, doesn’t provide you a written breakdown of the settlement funds, doesn’t show you the settlement check, and doesn’t show you copies of all the other documents associated with your settlement (checks payable to settle liens, for example).
How Can I Be Sure My Lawyer Is Doing Things Ethically?
First of all, read the lawyer’s reviews online. These will give you a good idea of what his or her or their clients think of their work, ethics, honesty, and transparency.
Second, take a look at the IARDC website (www.iardc.org) and search that lawyer. Any disciplinary cases involving that lawyer will be listed and accessible. Any situation where the lawyer has been reprimanded, censured, suspended, or disbarred will be listed. Plus, you will be able to learn details of each situation. It would be a wise move to avoid hiring a lawyer with a disciplinary history you find troubling (or any disciplinary history at all, many would suggest).
Finally, use your own Spidey sense when you talk to the lawyer the first time (before you hire her). Does this lawyer seem interested in my case? Do they seem like someone I can trust? Are they respectful? Do they listen to my concerns and answer my questions directly?
Do your homework and avoid the stress of buyer’s remorse.
- Illinois lawyers must maintain special trust accounts
- Those accounts must segregate the client’s money from that of the lawyer
- Lawyers cannot “borrow” from their IOLTAs and cannot advance settlement funds to their client
- Public websites can assist the consumer in finding a lawyer who does things properly
Contact Chicago Personal Injury Lawyer Stephen Hoffman
As in all cases involving injury and potential liability, if you have been hit by a vehicle, immediately get medical treatment, report the crash to police and your own insurance company, and contact a lawyer with expertise in your type of case, such as bicycle accidents or pedestrians hit by cars.
If you've been in an accident and have questions, contact Chicago personal injury attorney Stephen L. Hoffman for a free consultation at (773) 944-9737. Stephen has over 30 years of legal experience and has collected millions of dollars for his clients. He is listed as a SuperLawyer, has a 10.0 rating on Avvo, and is BBB A+ accredited. He is also an Executive Level Member of the Lincoln Square Ravenswood Chamber of Commerce.
Stephen handles personal injury claims on a contingency fee basis, which means you don’t pay anything up front, and he only gets paid if you do. Don’t wait another day; contact Stephen now.