MSC adopts new trust accounts rule

Banks providing Interest on Lawyer Trust Accounts (IOLTA) and other trust accounts must notify the Attorney Grievance Commission and the account holder of any overdrafts under a new rule adopted by the Michigan Supreme Court.

Rule 1.15A of the Michigan Rules of Professional Conduct will require lawyers to keep trust accounts only in financial institutions that have agreed in writing to provide the overdraft notices.

The rule, issued Dec. 15, becomes effective “nine months after entry of this order by the Court.”

The State Bar of Michigan will establish guidelines for financial institutions to obtain “approved status.”

Responding to cost concerns from the banking industry, the rule permits financial institutions to assess attorneys the reasonable costs of providing the notices

but those costs may not be charged against principal, nor against interest or dividends earned on trust accounts, including earnings on IOLTA accounts payable to the Michigan State Bar Foundation under Rule 1.15. Such costs, if charged, shall not be borne by clients.

Rule 1.15A allows the Grievance Administrator to initiate a request for investigation and gives lawyers 21 days to explain the cause of the overdraft and how it was corrected.