What are "client funds" and how must they be handled?

Client funds refer to any money that a lawyer holds for the benefit of a client, which can include retainers, settlement proceeds, or any other funds entrusted to the attorney for specific purposes. In order to maintain the highest ethical standards and comply with legal obligations, these funds must be handled with the utmost care.

The correct approach is to keep client funds in separate trust accounts, distinct from the attorney’s personal or business funds. This separation helps ensure that client funds are protected and not used for any unauthorized purposes, thus maintaining client trust and adhering to professional responsibility rules. This practice prevents any potential misappropriation or misuse of funds, which is a serious violation of legal ethics.

Furthermore, reliance on specific legal requirements and guidelines set by the state bar ensures compliance and helps maintain the integrity of the legal profession. Keeping client funds in a separate trust account exemplifies proper fiduciary duty and safeguards clients’ interests.