New York Law (NYLE) Practice Exam

What is required of a lawyer who receives a deposit on a real estate contract?

1. Must deposit the money in a personal bank account

2. Must hold the money in a separate business account

3. Must deposit the $5,000 in his attorney trust account

4. Must return the deposit to the buyer upon request

The correct answer is: Must deposit the $5,000 in his attorney trust account

A lawyer who receives a deposit on a real estate contract is required to deposit the funds into a special attorney trust account. This account is designed to hold client funds separate from the lawyer's personal or business funds, ensuring that the money is safeguarded and used only for its intended purpose. Attorney trust accounts are subject to strict rules and regulations that protect the interests of clients, which is particularly important in real estate transactions where significant sums of money are involved. By depositing the real estate deposit into an attorney trust account, the lawyer complies with professional conduct rules that mandate proper handling of client funds. This ensures transparency and accountability, and it provides a clear separation between the lawyer’s personal assets and the funds entrusted to them by clients. This practice also helps to prevent any potential conflicts of interest or misuse of client funds, reinforcing the ethical obligations of the attorney. The other options do not align with the legal and ethical requirements for handling client funds, as they either involve personal account handling or insufficient protection and accountability measures for client deposited funds.