Office of the General Counsel

• Jurisdiction: Georgia,United States
• Citation: Vol. 28 No. 5 Pg. 0003
• Pages: 0003
• Publication year: 2023

Office of the General Counsel Vol. 28 No. 5 Pg. 3 Georgia Bar Journal April, 2023

You Can Bank on This

In a time of bank turmoil, here's what lawyers should do to ensure the safety of client funds held in a trust account.

BY PAULA FREDERICK

"I just spent 30 minutes on the phone with Lula Jones," your partner announces as she enters your office. "She is convinced that BigBank is going to fail, and take all her escrowed money with it. She actually wanted me to pull it out of the bank and hold it as cash!"

"Did you remind her that the Court ordered us to hold the proceeds from the sale of her house in our trust account until she and her ex work out their differences?" you ask.

"Of course!" your partner bristles. "But that's not likely to happen anytime soon, and in the meantime, she's going to drive us crazy! She wants written confirmation from the bank that her funds are completely insured!"

"Lula is a worrywart, but she does have a good point," you admit. "We probably ought to get a better understanding of what's insured and what's not. And what do we know about BigBank? Is it doing the risky things that led to those other bank failures?"

"Ummm ... no idea," your partner admits.

In a time of bank turmoil, what should lawyers do to ensure the safety of client funds held in a trust account?

First, choose a stable bank for your trust account. Georgia lawyers are ahead of the game on that; our Bar Rule

1.15 (III) requires that trust accounts be held at FDIC-insured banks on a Bar-approved list.

Second, be sure you understand how FDIC insurance works. Deposits are insured up to $250,000. Each client whose funds are in a trust account is treated as a separate "owner" for purposes of FDIC insurance, so deposits held in trust are insured for each client as if in a separate account. FDIC rules include strict recordkeeping...