Lawyers often come to us with funds in their trust account that they can’t identify. Perhaps they hire an accountant or CPA to try to determine to whom the funds belong. What I hear is invariably the same: “My CPA says he can’t trace the funds to any particular client. So, the funds must be mine. He says that’s good enough for me to transfer these funds to myself. Is that right?” Unfortunately, no. The State Bar’s position is that if you cannot conclusively determine that the funds belong to you, you may not transfer them to yourself. You will have the burden of demonstrating that the funds are earned fees to which you were entitled, if you are ever audited.
So, ask yourself, can you trace those funds to an earned fee for a particular client? Can you find the client ledger showing the disbursements, and the remaining funds in trust? Can you locate the client fee agreement that demonstrates the basis for your fee? There should be a paper trail that will support the transfer of those funds from the trust account to the operating account.
What if you can’t trace the funds in trust back to a particular client and demonstrate that they are fees owed to you? Then, the funds must remain in trust until they can be escheated to the North Carolina State Treasurer. Rule 1.15-2(r) states that
[i]f entrusted property is unclaimed, the lawyer shall make due inquiry of his or her personnel, records, and other sources of information in an effort to determine the identity and location of the owner of the property….If the effort is unsuccessful and the provisions of G.S. 116B-53 are satisfied, the property shall be deemed abandoned, and the lawyer shall comply with the requirements of Chapter 116B of the General Statutes concerning the escheat of abandoned property.
If you need technical assistance concerning the escheat of funds, you can go to www.nctreasurer.com or call the Office of the North Carolina State Treasurer in Raleigh.