Multistate Professional Responsibility Examination (MPRE)The Client-Lawyer RelationshipMedium
A lawyer is representing a client in a real estate transaction. The lawyer receives a large sum of money from the client to be held in trust for the purchase of the property. The lawyer places the funds into the firm's general operating account instead of a client trust account. The lawyer does not intend to misappropriate the funds, but the operating account is sometimes overdrawn due to firm expenses. Has the lawyer committed an ethical violation?
- AYes, because client funds must always be kept separate from the lawyer's own funds in a client trust account.
- BNo, as long as the lawyer does not intend to misappropriate the funds and eventually uses them for the client's purpose.
- CNo, because the operating account is still a bank account, and the funds are accessible.
- DYes, but only if the operating account is overdrawn and client funds are actually lost.
Show answer & explanationAnswer & explanation
Correct answer: A. Yes, because client funds must always be kept separate from the lawyer's own funds in a client trust account.
A lawyer must keep client funds separate from the lawyer's own funds. This generally means placing them in a client trust account, not the firm's operating account, to prevent commingling and protect client money from the lawyer's business expenses or creditors.
Why the other options are wrong
- B. Intent to misappropriate is not required for commingling to be an ethical violation. The act of mixing funds is the violation.
- C. The accessibility of funds does not negate the ethical requirement for separation of client and firm funds.
- D. The violation occurs at the moment of commingling, not only if the funds are actually lost or an account is overdrawn.
Commingling Funds
Commingling occurs when a lawyer mixes client funds with their own personal or firm funds. This is a serious ethical violation, requiring client funds to be held separately in a client trust account.
- Client funds must be separate.
- Use a client trust account (IOLTA).
- No intent to misappropriate needed for violation.
Memory trick: Trust Account, Not My Account: Keep client cash safe and separate.