Supreme Court amends professional conduct rules concerning IOLTA

The Indiana Supreme Court has amended the Indiana Rules of Professional Conduct with new language addressing how to handle unclaimed or unidentified funds from client trust accounts.

Justices, in an unanimous Friday order, made amendments to Rule 1.15. The amendments go into effect Jan. 1, 2023.

Under the amended rule, all funds transmitted to the Indiana Bar Foundation “pursuant to the rule shall be held, invested and distributed periodically in accordance with a plan of distribution which shall be prepared by the Foundation and approved at least biennially by the Supreme Court of Indiana.”

The amendment also adds a new section, Rule 1.15 (h), which explains that reasonable efforts must be taken to locate and distribute unclaimed or unidentified funds from a client trust account to its owner. Reasonable efforts include:

• A review of transaction records, client ledgers, case files and any other relevant fee records.
• Periodic correspondence of the type contemplated by the lawyer’s or law firm’s relationship with the client, former client or third party.

If initial efforts are unsuccessful, additional reasonable efforts can include examinations of local telephone directories, courthouse records, voter registration records, local tax records, motor vehicle records or the use of consolidated online search services that access such records.

If the owner of funds cannot be identified or located in its Interest on Lawyer Trust Account or non-IOLTA trust account, the order says that lawyers, law firms or the estate of the deceased lawyer must pay the funds to the bar foundation. Lawyers or law firms tasked with this obligation have five years to identify or locate the owner of the funds.

Reasonable efforts to locate or identify the owner must be certified before remitting funds to the bar foundation. When the funds are remitted, the name and last known address of each person entitled to the funds, if known, must be submitted to the foundation, along with the amount of any unclaimed or unidentified funds.

If the owner of the funds is identified and located within five years, the foundation — which must maintain sufficient reserves to pay such claims — will refund that sum to the lawyer, law firm or the deceased lawyers’ estate. Those recipients must then submit verification to the foundation that the funds were returned.

The remittance “shall not constitute misconduct or grounds for discipline if the lawyer or law firm exercised reasonable efforts to locate the owner and distribute the funds, and remitted the funds to the Indiana Bar Foundation in good faith.”

A duty to locate or identify the funds’ owner will end once reasonable efforts have been made for five years and the funds have officially been remitted to the foundation.

Additionally, lawyers and law firms must describe in its engagement letter or fee agreement the Rule 1.15 process. Those who include Rule 1.15(h) in such documents will be protected from liability “as long as they exercise reasonable efforts to identify the owner of unidentified funds and locate the owner of unclaimed funds.”