Rule 1.15. Safekeeping Property

Alabama Rules of Professional Conduct Client-Lawyer Relationship

Rule 1.15.

Safekeeping Property.

Definitions. As used in this rule, the terms below shall have the following

meanings:

"IOLTA account" means a pooled interest- or dividend-bearing trust account

benefiting the Alabama Law Foundation established in an eligible institution for the deposit

of nominal or short-term funds of clients or third persons.

"Eligible institution" means any bank or savings and loan association authorized by

federal or state laws to do business in Alabama, whose deposits are insured by an agency

of the federal government, or any open-end investment company registered with the

Securities and Exchange Commission and authorized by federal or state laws to do

business in Alabama. Eligible institutions must meet the requirements set out in

subsection (k).

"Interest- or dividend-bearing trust account" means a federally insured checking

account or a business checking account with an automated investment feature, such as

an overnight sweep and investment in a government money-market fund or daily

(overnight) financial-institution repurchase agreement invested solely in or fully

collateralized by U.S. Government Securities. A daily financial-institution repurchase

agreement may be established only with an eligible institution that is "well capitalized" or

"adequately capitalized" as those terms are defined by applicable federal statutes and

regulations. An open-end money-market fund must hold itself out as a money-market fund

as defined by applicable federal statutes and regulations under the Investment Company

Act of 1940, and, at the time of the investment, have total assets of at least $250,000,000.

The funds covered by this rule shall be subject to withdrawal upon request and without

delay except as permitted by law

utes and

regulations. An open-end money-market fund must hold itself out as a money-market fund

as defined by applicable federal statutes and regulations under the Investment Company

Act of 1940, and, at the time of the investment, have total assets of at least $250,000,000.

The funds covered by this rule shall be subject to withdrawal upon request and without

delay except as permitted by law.

"Allowable reasonable fees" means: (1) per check charges, (2) per deposit

charges, (3) a fee in lieu of minimum balance, (4) Federal deposit insurance fees, (5)

sweep fees, and (6) a reasonable IOLTA account administrative fee.

"U.S. Government Securities" means U.S. Treasury obligations and obligations

issued or guaranteed as to principal and interest by the United States or any agency or

instrumentality thereof.

(a) A lawyer shall hold the property of clients or third persons that is in the lawyer's

possession in connection with a representation separate from the lawyer's own property.

Funds shall be kept in a separate account maintained in the state where the lawyer's

office is situated, or elsewhere with the consent of the client or third person. No funds of

a lawyer shall be deposited in such a trust account, except (1) unearned attorney fees

that are being held until earned, and (2) funds sufficient to pay bank service charges on

that account or to obtain a waiver thereof. Any funds while in the lawyer's trust account

that the lawyer is entitled to receive as a fee, reimbursement, or costs shall not be used

by the lawyer for any personal or business expenses until such funds are removed from

the trust account.

Interest or dividends, if any, on funds, less fees charged to the account, other than

overdraft and returned item charges, shall belong to the client or third person, except as

provided in Rule 1.15(k), and the lawyer shall have no right or claim to the interest,

dividends, or other earnings. Other property shall be identified as such and appropriately

safeguarded

d from

the trust account.

Interest or dividends, if any, on funds, less fees charged to the account, other than

overdraft and returned item charges, shall belong to the client or third person, except as

provided in Rule 1.15(k), and the lawyer shall have no right or claim to the interest,

dividends, or other earnings. Other property shall be identified as such and appropriately

safeguarded. Complete records of such account funds and other property shall be kept

by the lawyer and shall be preserved for six (6) years after termination of the

representation.

A lawyer shall designate all such trust accounts, whether general or specific, as

well as deposit slips and all checks drawn thereon, as either an "Attorney Trust Account,"

an "Attorney Escrow Account," or an "Attorney Fiduciary Account." A lawyer shall

designate all business accounts, as well as other deposit slips and all checks drawn

thereon, as a "Business Account," a "Professional Account," an "Office Account," a

"General Account," a "Payroll Account," or a "Regular Account." However, nothing in this

rule shall prohibit a lawyer from using any additional description or designation for a

specific business or trust account, including, for example, fiduciary accounts maintained

by the lawyer as executor, guardian, trustee, receiver, or agent or in any other fiduciary

capacity.

(b)

Upon receiving funds or other property in which a client or third person has

an interest from a source other than the client or the third person, a lawyer shall promptly

notify the client or third person. Except as stated in this rule or otherwise permitted by law

or by agreement with the client, a lawyer shall promptly deliver to the client or third person

any funds or other property that the client or third person is entitled to receive and, upon

request by the client or third person, shall promptly render a full accounting regarding that

property.

romptly

notify the client or third person. Except as stated in this rule or otherwise permitted by law

or by agreement with the client, a lawyer shall promptly deliver to the client or third person

any funds or other property that the client or third person is entitled to receive and, upon

request by the client or third person, shall promptly render a full accounting regarding that

property.

(c)

When in the course of representation a lawyer is in possession of property

in which both the lawyer and another person claim interests, the property shall be kept

separate by the lawyer until there is an accounting and a severance of their interests. If a

dispute arises concerning their respective interests, the portion in dispute shall be kept

separate by the lawyer until the dispute is resolved.

(d)

A lawyer shall not make disbursements of a client's funds from separate

accounts containing the funds of more than one client unless the client's funds are

collected funds; provided, however, that if a lawyer has a reasonable and prudent belief

that a deposit of an instrument payable at or through a bank representing the client's funds

will be collected promptly, then the lawyer may, at the lawyer's own risk, disburse the

client's uncollected funds. If collection does not occur, then the lawyer shall, as soon as

practical, but in no event more than five (5) working days after notice of noncollection,

replace the funds in the separate account.

sit of an instrument payable at or through a bank representing the client's funds

will be collected promptly, then the lawyer may, at the lawyer's own risk, disburse the

client's uncollected funds. If collection does not occur, then the lawyer shall, as soon as

practical, but in no event more than five (5) working days after notice of noncollection,

replace the funds in the separate account.

(e)

A lawyer who practices in Alabama shall maintain current financial records

as provided in these Rules and as required by Rule 1.15 of these Rules and shall retain

the following records for a period of six (6) years after termination of the representation:

1.

Receipt and disbursement journals containing a record of

deposits to and withdrawals from client trust accounts, specifically identifying

the date, source, and description of each item deposited, as well as the date,

payee, and purpose of each disbursement;

2.

Ledger records for all client trust accounts showing, for each

separate trust client or third person, the source of all funds deposited, the

names of all persons for whom the funds are or were held, the amount of such

funds, the descriptions and amounts of charges or withdrawals, and the names

of all persons to whom such funds were disbursed;

3.

Copies of retainer and compensation agreements with clients as

required by Rule 1.5 of these Rules;

4.

Copies of accountings to clients or third persons showing the

disbursement of funds to them or on their behalf;

5.

Copies of bills for legal fees and expenses rendered;

6.

Copies of records showing disbursements on behalf of clients;

7.

The physical or electronic equivalents of all trust-account

checkbook registers, bank statements, records of deposit, prenumbered

canceled checks, and substitute checks provided by a financial institution;

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disbursement of funds to them or on their behalf;

5.

Copies of bills for legal fees and expenses rendered;

6.

Copies of records showing disbursements on behalf of clients;

7.

The physical or electronic equivalents of all trust-account

checkbook registers, bank statements, records of deposit, prenumbered

canceled checks, and substitute checks provided by a financial institution;

8.

Records of all electronic transfers from client trust accounts,

including the name of the person authorizing the transfer, the date of transfer,

the name of the recipient, and confirmation from the financial institution of the

trust-account number from which money was withdrawn and the date and the

time the transfer was completed;

9.

Copies of monthly trial balances and quarterly reconciliations of

the client trust accounts maintained by the lawyers; and

10.

Copies of those portions of client files that are reasonably related

to client trust-account transactions.

(f)

With respect to client trust accounts required by Rule 1.15 of these Rules:

1.

Only a lawyer admitted to practice in this jurisdiction or a person

under the direct supervision of the lawyer shall be an authorized signatory or

shall authorize transfers from a client trust account;

2.

Receipts shall be deposited intact, and records of deposit should

be sufficiently detailed to identify each item; and

3.

Withdrawals shall be made only by check payable to a named

payee, and not to cash, or by authorized electronic transfer.

(g)

Records required by Rule 1.15 may be maintained by electronic,

photographic, or other media, provided that they otherwise comply with these Rules and

that printed copies can be produced. These records shall be readily accessible to the

lawyer.

each item; and

3.

Withdrawals shall be made only by check payable to a named

payee, and not to cash, or by authorized electronic transfer.

(g)

Records required by Rule 1.15 may be maintained by electronic,

photographic, or other media, provided that they otherwise comply with these Rules and

that printed copies can be produced. These records shall be readily accessible to the

lawyer.

(h)

Upon dissolution of a law firm or of any legal professional organization, the

partners, shareholders, or members (as the case may be) shall make reasonable

arrangements for the maintenance of client trust-account records specified in these Rules.

(i)

A lawyer shall request that the financial institution where the lawyer

maintains a trust account file a report to the Office of General Counsel of the Alabama

State Bar in every instance where a properly payable item or order to pay is presented

against a lawyer's trust account with insufficient funds to pay the item or order when

presented and either (1) the item or payment order is returned because there are

insufficient funds in the account to pay the item or order or (2) if the request is honored

by the financial institution and the overdraft created thereby is not paid within three (3)

business days of the date the financial institution sends notification of the overdraft to the

lawyer. The report of the financial institution shall contain the same information, or a copy

of that information, forwarded to the lawyer who presented the item or order.

A lawyer shall enter into an agreement with the financial institution that holds the

lawyer's trust account pursuant to which the financial institution agrees to file the report

required by this rule. Every lawyer shall have the duty to assure that his or her trust

accounts maintained with a financial institution in Alabama are pursuant to such an

agreement. This duty belongs to the lawyer and not to the financial institution

ement with the financial institution that holds the

lawyer's trust account pursuant to which the financial institution agrees to file the report

required by this rule. Every lawyer shall have the duty to assure that his or her trust

accounts maintained with a financial institution in Alabama are pursuant to such an

agreement. This duty belongs to the lawyer and not to the financial institution. The filing

of a report with the Office of General Counsel pursuant to this paragraph shall constitute

a proper basis for an investigation by the Office of General Counsel of the lawyer who is

the subject of the report, pursuant to the Alabama Rules of Disciplinary Procedure.

Nothing in this rule shall preclude a financial institution from charging a lawyer or a law

firm a fee for producing the report and maintaining the records required by this rule. Every

lawyer and law firm maintaining a trust account in Alabama shall hereby be conclusively

deemed to have consented to the reporting and production requirements mandated by

this rule and shall hold harmless the financial institution for its compliance with the

aforesaid reporting and production requirements. Neither the agreement with the financial

institution nor the reporting or production of records by a financial institution made

pursuant to this rule shall be deemed to create in the financial institution a duty to exercise

a standard of care or a contract with third parties that may sustain a loss as a result of a

lawyer's overdrawing a trust account.

A lawyer shall not fail to produce any of the records required to be maintained by

these Rules at the request of the Office of General Counsel, the Disciplinary Commission,

or the Disciplinary Board. This obligation shall be in addition to, and not in lieu of, any

other requirements of the Rules of Professional Conduct or Rules of Disciplinary

Procedure for the production of documents and evidence.

er shall not fail to produce any of the records required to be maintained by

these Rules at the request of the Office of General Counsel, the Disciplinary Commission,

or the Disciplinary Board. This obligation shall be in addition to, and not in lieu of, any

other requirements of the Rules of Professional Conduct or Rules of Disciplinary

Procedure for the production of documents and evidence.

(j)

A lawyer, except a lawyer not engaged in active practice pursuant to

Alabama Code 1975, §§ 34-3-17 and -18, shall maintain a separate account to hold funds

of a client or third person. Every lawyer admitted to practice in this State shall annually

certify to the Secretary of the Alabama State Bar that all IOLTA eligible funds are held in

an IOLTA Account, or that the lawyer is exempt because the lawyer: does not have an

office within the State of Alabama; does not hold funds for clients or third persons; is not

engaged in the active practice of law; is a judge, attorney general, public defender, U.S.

attorney, district attorney, on duty with the armed services or employed by a local, state,

or federal government, and is not otherwise engaged in the private practice of law; or is a

corporate or other in-house counsel or teacher of law and is not otherwise engaged in the

private practice of law. Certification may be made by a firm on behalf of all lawyers in a

firm.

(k)

Lawyers shall hold in IOLTA accounts all funds of clients or third persons

that are nominal in amount or that the lawyer expects to be held for a short period and

from which no income could be earned for the client or third person in excess of the costs

incurred to secure such income. In no event shall a lawyer receive the interest on an

IOLTA account

behalf of all lawyers in a

firm.

(k)

Lawyers shall hold in IOLTA accounts all funds of clients or third persons

that are nominal in amount or that the lawyer expects to be held for a short period and

from which no income could be earned for the client or third person in excess of the costs

incurred to secure such income. In no event shall a lawyer receive the interest on an

IOLTA account.

In determining whether to deposit funds into an IOLTA account, a lawyer shall

consider the following factors: the amount of interest or dividends likely to be earned

during the period the funds are expected to be deposited; the estimated cost of

establishing and administering a non-IOLTA trust account for the benefit of the client or

third person, including the cost of the lawyer's services and the cost of preparing any tax

reports required for interest accruing to the benefit of a client or third person; the ability of

financial institutions or lawyers or law firms to calculate and pay interest to individual

clients or third persons; and any other circumstances that affect the ability of the client or

third-person funds to earn income in excess of the costs incurred to secure such funds. A

lawyer shall review the IOLTA account at reasonable intervals to determine whether

changed circumstances require further action with respect to the funds of any client or

third person.

The determination whether the funds of a client or third person can earn income in

excess of costs as provided in (k) above shall rest in the sound judgment of the lawyer or

law firm, and no lawyer shall be charged with an ethical impropriety or breach of

professional conduct based on the good-faith exercise of such judgment.

Offering IOLTA accounts is voluntary for financial institutions

The determination whether the funds of a client or third person can earn income in

excess of costs as provided in (k) above shall rest in the sound judgment of the lawyer or

law firm, and no lawyer shall be charged with an ethical impropriety or breach of

professional conduct based on the good-faith exercise of such judgment.

Offering IOLTA accounts is voluntary for financial institutions. Lawyers may place

trust accounts only in eligible institutions that meet the requirements of this rule, including:

Interest Rates: Eligible institutions shall pay on IOLTA accounts the highest interest

rate or dividend the financial institution offers to its non-IOLTA customers when the IOLTA

account meets or exceeds the same minimum balance and other eligibility requirements,

if any.

A financial institution shall pay on IOLTA accounts the highest interest rate or

dividend generally available among the following product types or any comparable

product type (if the product type is available from the financial institution to its nonIOLTA

customers) by either using the identified product type as an IOLTA account or paying the

equivalent interest rate or dividend on the existing IOLTA account in lieu of actually

establishing the highest interest rate or dividend product:

1.

An interest-bearing checking account, such as a negotiable order

of withdrawal (NOW) account, or business checking account with interest.

2.

A business checking account with an automated investment

feature, such as an overnight sweep and investment in repurchase agreements

or money-market funds as described in the definitions.

3.

A government (such as for municipal deposits) interest-bearing

checking account.

4.

A checking account paying preferred interest rates, such as

money-market or indexed rates.

5.

Any other suitable interest- or dividend-bearing deposit account

offered by the institution to its non-IOLTA customers.

As an alternative, the financial institution may pay:

6

ed in the definitions.

3.

A government (such as for municipal deposits) interest-bearing

checking account.

4.

A checking account paying preferred interest rates, such as

money-market or indexed rates.

5.

Any other suitable interest- or dividend-bearing deposit account

offered by the institution to its non-IOLTA customers.

As an alternative, the financial institution may pay:

6.

An amount on funds, net of allowable reasonable fees, that would

otherwise qualify for investment options described in 1 through 4 above equal to

55% of the Federal Funds Target Rate as of the first business day of the quarter

or other IOLTA remitting period.

The following considerations will apply to determinations of comparability:

1.

Accounts that have limited check-writing capability required by

law or government regulation may not be considered as comparable to

IOLTA accounts in Alabama. Such accounts, however, are distinguished

from checking accounts that pay money-market interest rates on account

balances without the check-writing limitations. Such accounts are included

in the option 4 class identified above. Additionally, rates that are not

generally available to other account holders, such as special promotional

rates used to attract new customers, are not considered for comparability in

Alabama.

2.

For the purpose of determining compliance with the above

provisions, all participating financial institutions shall report in a form and

manner prescribed by the Alabama Law Foundation the highest interest or

dividend rate for each of the accounts they offer within the above-listed

account types. The foundation will certify participating financial institutions'

compliance with this rule on an annual basis.

3

determining compliance with the above

provisions, all participating financial institutions shall report in a form and

manner prescribed by the Alabama Law Foundation the highest interest or

dividend rate for each of the accounts they offer within the above-listed

account types. The foundation will certify participating financial institutions'

compliance with this rule on an annual basis.

3.

In determining the highest interest rate or dividend generally

available from the institution to its non-IOLTA customers, the eligible

institution may consider factors, in addition to the IOLTA account balance,

customarily considered by the institution when setting interest rates or

dividends for its customers, provided that those factors do not discriminate

between IOLTA accounts and accounts of non-IOLTA customers and

provided further that those factors do not include that the account is an

IOLTA account.

Pursuant to a written agreement between the lawyer and the eligible institution,

interest on the IOLTA account shall be remitted at least quarterly to the Alabama Law

Foundation.

Interest or dividends shall be calculated in accordance with the institution's

standard practice for non-IOLTA account customers, less reasonable fees, if any, in

connection with the deposited funds.

Allowable reasonable fees, as defined in this rule, are the only service charges or

fees permitted to be deducted from interest or dividend earned on IOLTA accounts.

Allowable reasonable fees may be deducted from interest or dividends on an IOLTA

account only at such rates and under such circumstances as is the eligible institution's

customary practice for its non-IOLTA customers. All other fees and charges shall not be

assessed against the interest or dividends earned on the IOLTA account, but rather shall

be the responsibility of, and may be charged to, the lawyer maintaining the IOLTA account

d from interest or dividends on an IOLTA

account only at such rates and under such circumstances as is the eligible institution's

customary practice for its non-IOLTA customers. All other fees and charges shall not be

assessed against the interest or dividends earned on the IOLTA account, but rather shall

be the responsibility of, and may be charged to, the lawyer maintaining the IOLTA account.

Fees or charges in excess of the interest or dividend earned on the account for any

month or quarter shall not be taken from interest or dividend earned on other IOLTA

accounts or from the principal of the account.

Financial institutions may elect to pay higher rates than required by this rule or to

waive any or all fees on IOLTA accounts.

A statement should be transmitted to the Alabama Law Foundation with each

remittance showing the period for which the remittance is made, the name of the lawyer

or law firm from whose IOLTA account the remittance is being sent, the IOLTA account

number, the rate of interest applied, the gross interest or dividend earned during the

period, the amount and description of any service charges or fees assessed during the

remittance period, if any, the average account balance for the remittance period, and the

net amount of interest or dividend remitted for the period. A copy of the statement shall

also be sent to the lawyer.

(l)

All interest or dividends transmitted to and received by the Alabama Law

Foundation pursuant to Rule 1.15(k) shall be distributed by it for one or more of the

following purposes:

1.

To provide civil legal aid to the poor through access-to-justice

programs administered by organizations recognized as exempt from

taxation under Section 501(c)(3) of the Internal Revenue Code of 1986, as

amended, including, but not limited to, Volunteer Lawyers Programs in

Alabama and the Alabama Civil Justice Foundation;

2.

To provide for the administration of civil justice, including, but

not limited to, in rural communities in Alabama;

3

-justice

programs administered by organizations recognized as exempt from

taxation under Section 501(c)(3) of the Internal Revenue Code of 1986, as

amended, including, but not limited to, Volunteer Lawyers Programs in

Alabama and the Alabama Civil Justice Foundation;

2.

To provide for the administration of civil justice, including, but

not limited to, in rural communities in Alabama;

3.

To provide law-related educational programs to the public,

including, but not limited to, training for guardians ad litem and Court

Appointed Special Advocates; and

4.

For such other programs for the benefit of the public as the

Supreme Court of the State of Alabama specifically approves from time to

time.

(m)

Rules governing the receipt, disbursement, and retainage of funds received

pursuant to Rule 1.15(l):

1.

Not more than ten percent (10%) of such funds received in

any calendar year shall be used to pay the costs, expenses, and fees

associated with the administration of such funds.

2.

In any subsequent calendar year, at least fifty percent (50%)

of such funds received in the previous calendar year shall be distributed,

and any remaining funds may be retained and held as part of an

endowment.

3.

Prior to distributing any such funds, the Alabama Law

Foundation shall provide the Clerk of the Supreme Court of Alabama the

name of each beneficiary and the amount proposed to be distributed to such

beneficiary for approval by a majority of the members of the Court then

sitting.

(n)

A lawyer shall not fail to produce, at the request of the Office of General

Counsel, the Disciplinary Commission, or the Disciplinary Board, any of the records

required to be maintained by these Rules. This obligation shall be in addition to, and not

in lieu of, any other requirements of the Rules of Professional Conduct or the Rules of

Disciplinary Procedure for the production of documents and evidence.

ll not fail to produce, at the request of the Office of General

Counsel, the Disciplinary Commission, or the Disciplinary Board, any of the records

required to be maintained by these Rules. This obligation shall be in addition to, and not

in lieu of, any other requirements of the Rules of Professional Conduct or the Rules of

Disciplinary Procedure for the production of documents and evidence.

(o)

Beginning with the calendar quarter ending June 30, 2019, and continuing

for each and every quarter thereafter, the Alabama Law Foundation shall report to the

Supreme Court of Alabama the total funds received from IOLTA accounts, the total funds

distributed by the foundation, and a certification that the information reported to the

Supreme Court is correct. Such report shall be filed with the Clerk of the Supreme Court

of Alabama within thirty (30) days after the end of each such calendar quarter. The

quarterly report and the certification shall be in a form substantially similar to the form

appended to this Rule 1.15.

[Amended 8-21-92; Amended 8-28-92; Amended 8-1-97; Amended 4-14-2003;

Amended 9-27-2007, eff. 1-1-2008; Amended 7-16-2012, eff. 1-1-2013; Amended 1-1215;

Amended 5-22-2019; Amended 12-20-2024, effective 2-15-2025.]

Comment

A lawyer should hold property of others with the care required of a professional

fiduciary. Securities should be kept in a safe deposit box, except when some other form

of safekeeping is warranted by special circumstances. All property which is the property

of clients or third persons should be kept separate from the lawyer's business and

personal property and, if moneys, in one or more trust accounts. Separate trust accounts

may be warranted when administering estate moneys or acting in similar fiduciary

capacities.

Lawyers often receive funds from third parties from which the lawyers' fees will be

paid

nces. All property which is the property

of clients or third persons should be kept separate from the lawyer's business and

personal property and, if moneys, in one or more trust accounts. Separate trust accounts

may be warranted when administering estate moneys or acting in similar fiduciary

capacities.

Lawyers often receive funds from third parties from which the lawyers' fees will be

paid. If there is risk that the client may divert the funds without paying the fee, the lawyer

is not required to remit the portion from which the fee is to be paid. However, a lawyer

may not hold funds to coerce a client into accepting the lawyer's contention. The disputed

portion of the funds should be kept in trust and the lawyer should suggest means for

prompt resolution of the dispute, such as arbitration. The undisputed portion of the funds

shall be promptly distributed.

Third parties, such as a client's creditors, may have just claims against funds or

other property in a lawyer's custody. A lawyer may have a duty under applicable law to

protect such third-party claims against wrongful interference by the client, and accordingly

may refuse to surrender the property to the client. However, a lawyer should not

unilaterally assume to arbitrate a dispute between the client and the third party.

The obligations of a lawyer under this rule are independent of those arising from

activity other than rendering legal services. For example, a lawyer who serves as an

escrow agent is governed by the applicable law relating to fiduciaries even though the

lawyer does not render legal services in the transaction.

A "clients' security fund" provides a means through the collective efforts of the bar

to reimburse persons who have lost money or property as a result of dishonest conduct

of a lawyer. Where such a fund has been established, a lawyer should participate

scrow agent is governed by the applicable law relating to fiduciaries even though the

lawyer does not render legal services in the transaction.

A "clients' security fund" provides a means through the collective efforts of the bar

to reimburse persons who have lost money or property as a result of dishonest conduct

of a lawyer. Where such a fund has been established, a lawyer should participate.

A lawyer engaged in active practice is required to maintain a separate account to

hold funds of a client, unless the lawyer gives written notice to the Secretary of the

Alabama State Bar. A lawyer is engaged in active practice unless the lawyer has obtained

membership in the Alabama State Bar pursuant to the provisions of Alabama Code 1975,

§§ 34-3-17 and 34-3-18.

A lawyer who maintains a separate account to hold funds of a client must comply

with the Interest on Lawyers' Trust Accounts provisions, commonly known as IOLTA.

A lawyer may maintain more than one interest-bearing account to hold clients'

funds in compliance with IOLTA (commonly known as an IOLTA account) and may open

an IOLTA account at any time during the year. The depository for an IOLTA account shall

remit interest either to the Alabama Law Foundation or to the Alabama Civil Justice

Foundation, as the lawyer designates. A lawyer may change the beneficiary of an IOLTA

account at any time.

Rule 1.15(e) enumerates the basic financial records that a lawyer must maintain

with regard to all trust accounts of a law firm. These include the standard books of account

and the supporting records that are necessary to safeguard and account for the receipt

and disbursement of client or third-person funds as required by Rule 1.15. This rule

requires that lawyers maintain client trust account records for a period of six (6) years

after termination of each particular legal engagement or representation

nts of a law firm. These include the standard books of account

and the supporting records that are necessary to safeguard and account for the receipt

and disbursement of client or third-person funds as required by Rule 1.15. This rule

requires that lawyers maintain client trust account records for a period of six (6) years

after termination of each particular legal engagement or representation.

Rule 1.15(e)7 requires that the physical or electronic equivalents of all trustaccount

checkbook registers, bank statements, records of deposit, pre-numbered canceled

checks, and substitute checks be maintained for a period of six (6) years after termination

of each legal engagement or representation. The "Check Clearing for the 21st Century

Act" or "Check 21 Act," codified at 12 U.S.C. § 5001 et seq., recognizes "substitute

checks" as the legal equivalent of an original check. A "substitute check" is defined at 12

U.S.C. § 5002(16) as "a paper reproduction of the original check that contains an image

of the front and back of the original check; bears a MICR ('magnetic ink character

recognition') line containing all the information appearing on the MICR line of the original

check ...; conforms ... with generally applicable industry standards for substitute checks;

and is suitable for automated processing in the same manner as the original check."

Banks, as defined in 12 U.S.C. § 5002(2), are not required to return to customers the

original canceled checks. Most banks now provide electronic images of checks to

customers who have access to their accounts on Internet-based Web sites. It is the

lawyer's responsibility to download electronic images. Electronic images shall be

maintained for the requisite number of years and shall be readily available for printing

upon request or shall be printed and maintained for the requisite number of years

hecks. Most banks now provide electronic images of checks to

customers who have access to their accounts on Internet-based Web sites. It is the

lawyer's responsibility to download electronic images. Electronic images shall be

maintained for the requisite number of years and shall be readily available for printing

upon request or shall be printed and maintained for the requisite number of years.

The Automated Clearing House ("ACH") Network is an electronic-funds transfer or

payment system that primarily provides for the interbank clearing of electronic payments

between originating and receiving participating financial institutions. ACH transactions are

payment instructions to either debit or credit a deposit account. ACH payments are used

in a variety of payment environments, including bill payments, business-to-business

payments, and government payments (e.g., tax refunds). In addition to the primary use of

ACH transactions, retailers and third parties use the ACH system for other types of

transactions including electronic check conversion ("ECC"). ECC is the process of

transmitting MICR information from the bottom of check, converting check payments to

ACH transactions depending upon the authorization given by the account holder at the

point of purchase. In this type of transaction, the lawyer should be careful to comply with

the requirements of Rule 1.15(e)8.

There are five types of check conversions with regard to which a lawyer should be

careful to comply with the requirements of Rule 1.15(e)8. First, in a "point-ofpurchase

conversion," a paper check is converted into a debit at the point of purchase and the paper

check is returned to the issuer. Second, in a "back-office conversion," a paper check is

presented at the point of purchase and is later converted into a debit and the paper check

is destroyed. Third, in an "account-receivable conversion," a paper check is converted

into a debit and the paper check is destroyed

on," a paper check is converted into a debit at the point of purchase and the paper

check is returned to the issuer. Second, in a "back-office conversion," a paper check is

presented at the point of purchase and is later converted into a debit and the paper check

is destroyed. Third, in an "account-receivable conversion," a paper check is converted

into a debit and the paper check is destroyed. Fourth, in a "telephone-initiated debit" or

"check-by-phone conversion," bank-account information is provided via the telephone and

the information is converted to a debit. Fifth, in a "Webinitiated debit," an electronic

payment is initiated through a secure Web environment. Rule 1.15(e) applies to each

electronic-fund transfer hereinabove described. All electronic-fund transfers shall be

recorded, and a lawyer should not reuse a check number that has been previously used

in an electronic-transfer transaction.

The potential for these records to serve as safeguards is realized only if the

documentation set forth in Rule 1.15(e)9 is regularly performed. The trial balance is the

sum of balances of each client's ledger card (or the electronic equivalent). Its value lies in

comparing it on a monthly basis to a control balance. The control balance starts with the

previous month's balance, then adds receipts from the Trust Receipts Journal and

subtracts disbursements from the Trust Disbursements Journal. Once the total matches

egularly performed. The trial balance is the

sum of balances of each client's ledger card (or the electronic equivalent). Its value lies in

comparing it on a monthly basis to a control balance. The control balance starts with the

previous month's balance, then adds receipts from the Trust Receipts Journal and

subtracts disbursements from the Trust Disbursements Journal. Once the total matches

the trial balance, the reconciliation readily follows by adding amounts of any outstanding

checks and subtracting any deposits not credited by the bank at month's end. This

balance should agree with the bank statement. Quarterly reconciliation is recommended

only as a minimum requirement; monthly reconciliation is the preferred practice, given the

difficulty of identifying an error (whether by the lawyer or by the bank) among three months

of transactions.

In some situations, documentation in addition to that listed in subparagraphs 1

through 9 of Rule 1.15(e) is necessary for a complete understanding of a trust-account

transaction. The type of document a lawyer must retain under subparagraph 10 because

it is "reasonably related" to a client trust transaction will vary depending on the nature of

the transaction and the significance of the document in shedding light on the transaction.

Examples of documents that typically must be retained under the paragraph include

correspondence between the client and the lawyer relating to a disagreement over fees

or costs or the distribution of proceeds, settlement agreements contemplating payment of

funds, settlement statements issued to the client, documentation relating to sharing

litigation costs and attorney fees for subrogated claims, agreements for division of fees

between lawyers, guarantees of payment to third parties out of proceeds recovered on

behalf of a client, and copies of bills, receipts, or correspondence related to any payments

to third parties on behalf of a client (whether made from the client's funds or from the

lawyer's funds advanced for the

haring

litigation costs and attorney fees for subrogated claims, agreements for division of fees

between lawyers, guarantees of payment to third parties out of proceeds recovered on

behalf of a client, and copies of bills, receipts, or correspondence related to any payments

to third parties on behalf of a client (whether made from the client's funds or from the

lawyer's funds advanced for the benefit of the client).

Rule 1.15(f) enumerates minimal accounting controls for client trust accounts. It

also enunciates the requirement that only a lawyer admitted to the practice of law in the

jurisdiction or a person who is under the direct supervision of the lawyer shall be the

authorized signatory or shall authorize electronic transfers from a client trust account.

Although it is permissible to grant non-lawyer access to a client trust account, such access

should be limited and closely monitored by the lawyer. The lawyer has a nondelegable

duty to protect and preserve the funds in a client trust account and can be disciplined for

failure to supervise subordinates who misappropriate client funds. See Rules 5.1, 5.2, and

5.3 of these Rules.

Authorized electronic transfers shall be limited to (1) money required for payment

to a client or third person on behalf of a client; (2) expenses properly incurred on behalf

of a client, such as filing fees or payment to third persons for services rendered in

connection with the representation; (3) money transferred to the lawyer for fees that are

earned in connection with the representation and are not in dispute; or (4) money

transferred from one client trust account to another client trust account

on behalf of a client; (2) expenses properly incurred on behalf

of a client, such as filing fees or payment to third persons for services rendered in

connection with the representation; (3) money transferred to the lawyer for fees that are

earned in connection with the representation and are not in dispute; or (4) money

transferred from one client trust account to another client trust account.

The requirement in subparagraph (f)2 that receipts shall be deposited intact means

that a lawyer cannot deposit one check or negotiable instrument into two or more accounts

at the same time, a practice commonly known as a "split deposit."

Rule 1.15(g) allows the use of alternative media for the maintenance of client trust-account records if printed copies of necessary reports can be produced. If trust records

are computerized, a system of regular and frequent (preferably daily) back-up procedures

is essential. If a lawyer uses third-party electronic or Internet-based file storage, the lawyer

must make reasonable efforts to ensure that the company has in place, or will establish,

reasonable procedures to protect the confidentiality of client information. See ABA Formal

Ethics Opinion 398 (1995). Records required by Rule 1.15(e) shall be readily accessible

and shall be readily available to be produced upon request by the client or third person

who has an interest as provided in Rule 1.l5, or by the official request of a disciplinary

authority, including, but not limited to, a subpoena duces tecum. Personally identifying

information in records produced upon request by the client or third person or by

disciplinary authority shall remain confidential and shall be disclosed only in a manner to

ensure client confidentiality as otherwise required by law or by court rule

in Rule 1.l5, or by the official request of a disciplinary

authority, including, but not limited to, a subpoena duces tecum. Personally identifying

information in records produced upon request by the client or third person or by

disciplinary authority shall remain confidential and shall be disclosed only in a manner to

ensure client confidentiality as otherwise required by law or by court rule.

Rule 29 of the Alabama Rules of Disciplinary Procedure provides for the

preservation of a lawyer's client trust-account records in the event the lawyer is transferred

to disability-inactive status, has disappeared or died, has been suspended or disbarred,

or has surrendered his or her law license.

Rule 1.15(h) provides for the preservation of a lawyer or firm's client trustaccount

records in the event of dissolution of the law practice. Regardless of the arrangements

the partners or shareholders make among themselves for maintenance of the client trust

records, each partner may be held responsible for ensuring the availability of these

records. For the purposes of these Rules, the terms "law firm," "partner," and "reasonable"

are defined in the Terminology section preceding these Rules.

Comparison with Former Alabama Code of Professional Responsibility

With regard to paragraph (a), DR 9-102(A) provided that “funds of clients” are to

be kept in an identifiable bank account in the state in which the lawyer's office is situated.

DR 9-102(B)(2) provided that a lawyer shall “identify and label securities and properties

of a client... and place them in... safekeeping...” DR 9-102(B)(3) required that a lawyer

“[m]aintain complete records of all funds, securities, and other properties of a client...”

Paragraph (a) extends these requirements to property of a third person that is in the

lawyer's possession in connection with the representation.

Paragraph (b) is substantially similar to DR 9-102(B)(1), (3) and (4)

a client... and place them in... safekeeping...” DR 9-102(B)(3) required that a lawyer

“[m]aintain complete records of all funds, securities, and other properties of a client...”

Paragraph (a) extends these requirements to property of a third person that is in the

lawyer's possession in connection with the representation.

Paragraph (b) is substantially similar to DR 9-102(B)(1), (3) and (4).

Paragraph (c) is similar to DR 9-102(A)(2), except that the requirement regarding

disputes applies to property concerning which an interest is claimed by a third person as

well as by a client.

Paragraph (d) is similar to a provision of DR 9-102, which was unique to Alabama.

This provision is carried forward into the Rules.

Paragraphs (e), (f), and (g) implement the provisions of Alabama's Interest on

Lawyers' Trust Accounts (IOLTA) Rules.

Comment to Rule 1.15 as Amended Effective July 1, 1997

In addition to making stylistic changes, the amendment added the second

paragraph in section (a) and added section (e) and section (k). It also added a sentence

to the first paragraph of section (a) to set out the conditions under which a lawyer can

deposit personal funds into a trust account.

Comment to Rule 1.15 as Amended Effective April 14, 2003

In addition to stylistic changes, the amendment added the “Definitions” section to

the rule and amended section (g) to provide that a lawyer shall hold those funds of a client

or a third person that are nominal or that the lawyer expects to be held for only a short

period in IOLTA accounts

osit personal funds into a trust account.

Comment to Rule 1.15 as Amended Effective April 14, 2003

In addition to stylistic changes, the amendment added the “Definitions” section to

the rule and amended section (g) to provide that a lawyer shall hold those funds of a client

or a third person that are nominal or that the lawyer expects to be held for only a short

period in IOLTA accounts.

Note from the reporter of decisions: The order amending Rule 1.15 of the

Alabama Rules of Professional Conduct, effective April 14, 2003, and adopting a

comment to that rule, is published in that volume of Alabama Reporter that contains

Alabama cases from 842 So.2d.”

Note from the reporter of decisions: The order amending Rule 1.15 of the

Alabama Rules of Professional Conduct, effective January 1, 2008, is published in that

volume of Alabama Reporter that contains Alabama cases from 966 So.2d.

Note from the reporter of decisions: The order amending Rule 1.15 and the

Comment thereto and Rule 4.2, Alabama Rules of Professional Conduct, is published in

that volume of Alabama Reporter that contains Alabama cases from 91 So. 3d.

Note from the reporter of decisions: The order amending Rule 1.15(e), effective

January 12, 2015, is published in that volume of Alabama Reporter that contains Alabama

cases from 154 So. 3d.

Note from the reporter of decisions: The order adopting Rule 1.15(o), effective

May 22, 2019, is published in that volume of Alabama Reporter that contains Alabama

cases from __ So. 3d.

Note from the reporter of decisions: The order amending Rule 1.15, Alabama

Rules of Professional Conduct, effective February 15, 2025, is published in that volume

of Alabama Reporter that contains Alabama cases from __ So. 3d.

APPENDIX TO RULE 1.15

IOLTA Foundation Disclosure Form

(Rule 1.15(o))

Name of Foundation: _______________________________

Date: ______________

isions: The order amending Rule 1.15, Alabama

Rules of Professional Conduct, effective February 15, 2025, is published in that volume

of Alabama Reporter that contains Alabama cases from __ So. 3d.

APPENDIX TO RULE 1.15

IOLTA Foundation Disclosure Form

(Rule 1.15(o))

Name of Foundation: _______________________________

Date: ______________

Report for Quarter Ending: ___________________

During the designated calendar quarter, the foundation identified above received

$__________________ pursuant to Rule 1.15(k) of the Alabama Rules of Professional

Conduct.

Also during this calendar quarter, the foundation disbursed the following funds

received from any source to the following organizations:

Name

Amount

1.

2.

3.

4.

TOTAL: $_____________

Of the total funds received by the foundation from all sources during this quarter, the

following was spent for the following purposes:

Salaries and employment benefits $___________________

Rent $___________________ Travel $___________________

Utilities $___________________

Other $___________________

TOTAL: $___________________

CERTIFICATION

I, _____________________, certify that the information contained on this IOLTA

Foundation Disclosure Form is true and correct to the best of my knowledge, after due

inquiry and investigation.

__________________

Date

_________________________

_________________________ (Name)

Foundation representative