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New rule offers guidance on unclaimed funds in escrow/IOLTA accounts.

What do I do with monies that have been held in my escrow account for a long time? I can't decide who has them and who to pay.

This is a question that was answered about three weeks ago. In the interim, a new rule under 1.15 of the Rules of Professional Conduct was adopted on April 30, and effective 60 days after that. It is titled Rule 1.15(v), Safe-Keeping Property. The rule specifically states if there is unclaimed or unidentified property in one's escrow/IOLTA fund, then the rule gives guidance. The rule notes if the lawyer has funds and can't, after reasonable efforts, determine who the owners of the funds are or if the funds are in a deceased lawyer's account then the funds have to be paid to the Pennsylvania IOLTA Board. The rule notes at the time funds are paid, the lawyer or firm shall submit to the IOLTA board, the name and last address of each person appearing from the lawyer or lawyer's firm entitled to the funds in the amount of the unclaimed funds.

The rule, in subsection 2, notes if the lawyer subsequently locates the owner of the funds then the IOLTA board shall refund those sums to the lawyer or law firm. The lawyer has to submit a verification to the IOLTA board that the funds have been returned to the lawyer. The rule under subsection 4 indicates a lawyer cannot be held liable for damages or to have breached any duty as a result of good faith adherence to the rule. The comment to the rule notes clearly the problem with unclaimed funds. The comment also notes a lawyer has to maintain records of those funds.

This is an interesting rule and perhaps not the wisest of rules. It creates a fair amount of paperwork. The lawyer now has to provide all the information of diligence and efforts in attempting to locate the client in reference to the Client Security Fund for unclaimed funds.

The old way of dealing with unclaimed funds was if a lawyer demonstrated good faith efforts to find the clients after many years, then the lawyer just paid the monies to the Client Security Fund or escheated the funds to the state. But, the lawyer didn't have to prepare all the paperwork required by the rule.

In theory, in a perfect world, this rule might be right. But, it is not a perfect world and lawyers are extremely overburdened as they are. This rule just creates a situation for the lawyer to fail.

In any event, this is the new rule (Rule 1.15(v)) and every lawyer should review this new rule because failure to comply could result in professional discipline.

Sometimes the Pennsylvania Supreme Court over-regulates the legal profession. Telling lawyers to do this or do that or notify or to give lists should not really be the subject of disciplinary rules and violations. But, the trend in recent years is to just place more and more burdens on lawyers and set lawyers up for professional discipline for what used to be just record-keeping matters and common sense actions. In any event, Rule 1.15, subsection V, will be in effect in 60 days after April 30, and all lawyers should review it and comply.

Advise a husband and wife that if a conflict does arise, they may seek independent counsel.

I am a lawyer who is involved with estate planning for families. I also have an estate practice. If a husband and wife come to meet with me for preparation of a will or estate planning, is there a conflict of interest?

The question is an interesting one because traditionally the lawyer would represent both the husband and the wife in estate planning. Oftentimes, the lawyer had a jointly opened file for the wills and estate plans of a husband and wife.

There, of course, could be exceptions. If the lawyer was aware of some marital discord or if the lawyer was aware that the estate plan was going to greatly disadvantage one of the spouses, then the lawyer would recognize the conflict and advise one of the spouses to get independent counsel. The general conflict of interest rule, Rule 1.7, is very clear that a lawyer can't represent one client if the representation would be adverse to another client. If there is going to be a situation where one spouse is going to greatly benefit from the marital planning and the other isn't, then that is a classic conflict or concurrent conflict of interest. Also, under Rule 1.7, if for instance, the lawyer has been the husband's business lawyer for years and receives substantial business in the future from the husband, then it might be in the lawyer's interest not to look out for the wife if the husband wants to do something different. That is again an example where a conflict could arise where the lawyer would place his or her interest one of the clients.

But, if this is a couple who appears to be happily married and there are no significant problems, a lawyer can represent both the husband and wife in writing wills and estate planning. The question becomes, should there be some explanation to both husband and wife that a conflict could arise at some point in time? The better practice, of course, would be to do so and advise both the husband and wife that the lawyer will represent them, the lawyer doesn't see any conflict, but conflicts could arise in the future and if they wish to have independent counsel, they have a right to do so.

A good practice would be to place this disclosure either in the fee letter or a separate letter after the lawyer meets with the husband and wife. The letter doesn't have to review every possible problem, but should note that unfortunately when people are married the future always has the possibility that a conflict of interest could arise. It is unfortunate that one can't represent a happily married husband and wife without going through all these conflict disclosures. But, conflicts can arise and a wise lawyer might so advise the client.

Another issue that should also be considered is to advise both husband and wife that there would be no attorney-client privilege between a lawyer and the spouse if later there is a conflict with the husband and wife or litigation. Since everything that was discussed would be between the spouses, the privilege would not exist. The fee letter would be the appropriate place for this disclosure.

There would not appear to be any reason to have separate files for the husband and wife unless there's a conflict obvious from the beginning.

The world has really changed since this writer began practicing law 45 years ago. Now even when a happily married couple comes into a lawyer's office just for a simple will, that requires apparently more disclosures than anyone would have ever thought of, 30, 40, or 50 years ago.

But, having complained about that, there is some merit to fully apprising the husband and wife of potential problems and difficulties down the line. There is clearly a problem when the estate planning is going to be one sided and one of the spouses doesn't appreciate that. Obviously, when that arises, then the lawyer can't represent both and has to so advise the spouses and that advice should be in writing.

Chester County lawyer Samuel C. Stretton has practiced in the area of legal and judicial ethics for more than 35 years. He welcomes questions and comments from readers. If you have a question, call Stretton directly at 610-696-4243 or write to him at 301 S. High St. P.O. Box 3231, West Chester, Pennsylvania, 19381.