The Supreme Judicial Court's Standing Advisory Committee on the Rules of Professional Conduct has published revised proposed amendments to Rules 1.15 and 1.15A that address dormant IOLTA accounts and create a new mechanism for remitting unclaimed or unidentified IOLTA funds to the Massachusetts IOLTA Committee. These changes come in light of the SJC's decision in Matter of Olchowski, 485 Mass. 807 (2020), in which the Court determined that unclaimed or unidentified IOLTA funds could no longer be remitted to the State Treasurer's office in accordance with the abandoned property statute, MGL c. 200A. The revised proposed amendments follow comments received by the Committee after its 2021 publication of original proposed amendments. Key revisions include:
- Clarifying that records for trust funds and trust property must be maintained contemporaneously.
- Requiring financial institutions to report to Bar Counsel any IOLTA account that has shown inactivity for more than 3 consecutive years exclusive of interest payments. Following a report of inactivity, a lawyer must close the account and distribute the funds either to their owner(s) or to the IOLTA Committee as applicable with notice to Bar Counsel.
- Affirmatively requiring a lawyer who discovers that an IOLTA account contains funds that are unidentified or unclaimed to take reasonable and diligent efforts to identify the owner(s) of the unidentified funds or locate the owner of the unclaimed funds and disburse them.
- Permitting a lawyer to report voluntarily unidentified IOLTA funds if a lawyer has made reasonable and diligent but unsuccessful efforts to identify the owner. If bar counsel does not object within 120 days, the lawyer must promptly remit the unidentified funds to the IOLTA committee.
- Permitting a lawyer to remit unclaimed IOLTA funds to the IOLTA Committee at any time with notice to bar counsel if the lawyer has made reasonable and diligent but unsuccessful efforts to locate the owner.
- Requiring a lawyer to remit unidentified or unclaimed funds to the IOLTA committee with notice to Bar Counsel if the lawyer has been unable to identify the owner of unidentified funds or to locate the owner of unclaimed funds within 3 years after discovering that the IOLTA account contains unidentified or unclaimed funds.
- Expressly obligates a lawyer to respond to requests from Bar Counsel for information about the lawyer's efforts to identify or locate the owner of funds held in an IOLTA account, cooperate with Bar Counsel in any investigation of a claim of ownership of funds previously remitted to the IOLTA Committee, and notify Bar Counsel and the IOLTA Committee if the lawyer identifies or locates the owner of funds previously remitted to the IOLTA Committee.
- A new comment explaining that "reasonable and diligent efforts" are defined to include: for unidentified funds, a thorough review of bank records, accounting records and client files; for unclaimed funds, making inquiries of the client's family or acquaintances, examining public records, and conducting internet-based research.
- A new comment reminding attorneys that allowing unidentified or unclaimed funds to accumulate in an IOLTA may be grounds for discipline whether or not the lawyer transfers the funds to the IOLTA Committee.
- A new comment noting that trust funds in a non-IOLTA account for which the owner cannot be located or contacted are still governed by the Massachusetts abandoned property law, MGL c. 200A.
- Requiring a lawyer to maintain a client's file for no less than 10 years if the lawyer knows or reasonably should know that unclaimed or unidentified funds potentially related to the client file have been transferred to the IOLTA committee.
Bar Counsel’s proposed oversight over dormant IOLTA accounts and the transfer of funds to the IOLTA Committee means increased scrutiny of IOLTA practices and recordkeeping by Bar Counsel is on the horizon. The revised proposed amendments to MRPC 1.15 and 1.15A would impose increased recordkeeping and file maintenance requirements on Massachusetts attorneys, and only increase the incentive for attorneys diligently to create and maintain the IOLTA records required by MRPC 1.15, including check registers, client ledgers and reconciliation reports, for each and every IOLTA account.
Now is the time – before these new rules take effect – for lawyers to assess their IOLTA compliance and implement changes. Doing so will minimize exposure to discipline if and when it becomes necessary to remit funds to the IOLTA Committee or a report is made to Bar Counsel.
Attorney Alan Brown regularly advises attorneys on IOLTA compliance issues and risk management strategies, and has successfully defended multiple lawyers in disciplinary actions arising out of alleged IOLTA violations. Please contact Alan to discuss your IOLTA situation and solutions for addressing it.