New York Law (NYLE) Practice Exam

What must a lawyer do with a trust deposit received from a client for future services?

1. Hold it in a personal account until services are rendered

2. Deposit it immediately in a trust account

3. Return it to the client if services are not rendered

4. Inform the client about the fee structure first

The correct answer is: Deposit it immediately in a trust account

When a lawyer receives a trust deposit from a client for future services, the proper action is to deposit that money immediately into a trust account. This requirement stems from the ethical obligations of attorneys to handle client funds with care and integrity. Trust accounts, also known as IOLTA (Interest on Lawyers' Trust Accounts) in many jurisdictions, are specifically designed to hold client funds separately from the attorney's personal or business funds. By depositing the funds in a trust account, the lawyer ensures that the money is safeguarded and that there is a clear separation of funds, which prevents any potential misuse or commingling of client and lawyer funds. The funds remain the client’s property until earned as fees based on the services provided. This practice is critical because it not only meets ethical guidelines but also protects the interests of the client. It ensures transparency and provides an audit trail for the handling of the funds, which is crucial if there are questions about the fees or services rendered at a later date. Other options, such as holding the deposit in a personal account or returning it to the client without first placing it in a trust account, do not comply with these ethical standards and could lead to serious misconduct charges against the attorney. Informing the client about the