New York Law (NYLE) Practice Exam

What is the protocol for an attorney who receives client funds that are not theirs?

1. Deposit them in a personal bank account

2. Keep them in the attorney's general funds

3. Hold them in a trust account until resolution

4. Return them to the client immediately

The correct answer is: Hold them in a trust account until resolution

When an attorney receives client funds that do not belong to them, the appropriate action is to hold those funds in a trust account until the matter is resolved. This protocol is in place to ensure that the attorney maintains the highest ethical standards and safeguards the client's money. Trust accounts, often referred to as IOLA (Interest on Lawyers' Accounts) accounts in New York, are specifically designed to segregate client funds from the attorney's personal or operational funds. By depositing client funds into a trust account, the attorney ensures those funds are maintained separately, providing protection for the client and adhering to legal and professional obligations. The requirement to use a trust account is rooted in the principle of fiduciary duty, which mandates that attorneys act in their client's best interests. Holding funds in a trust account also helps prevent any potential conflicts of interest and protects the funds from being misappropriated or used for unauthorized purposes. Returning the funds to the client immediately may not always be appropriate if there are unresolved issues related to the funds, such as pending fees or expenses associated with ongoing representation. Furthermore, depositing the funds in a personal bank account or utilizing them as part of the attorney's general funds would constitute a violation of ethical rules governing attorney conduct, jeopardizing both the attorney's