Trust funds are under attack when a bank fails. With high funds at stake, when a bank falls down the financial hole, so do their client’s funds and that could leave people in despair. Having millions and getting back $250,000 can be a big chunk of change to say farewell to and lawyers representing the fund are usually held responsible for such a devastating loss.

Recently, lawyers have flooded bar associations with questions about how much responsibility belongs to them. Ethically, reported the associations, “lawyers must be cautious about where they hold clients’ funds, making sure they’re in Federal Deposit Insurance Corp. (FDIC)-insured, solid banks.”

Should funds be split in different banks to insure deposits then? Yes.

Research indicates that lawyers shouldn’t be worried about disciplinary actions if a bank fails UNLESS the lawyer DIDN’T choose an FDIC-insured, stable bank. Still…the bar association is advising lawyers to “take reasonable precautions,” and consult their insurance carriers.

“There’s no specific ethics opinion concerning what to do if a bank fails,” said Elizabeth Tarbert, ethics counsel for the Florida Bar. “Nevertheless, lawyers must act prudently and determine what kind of institution [they are] dealing with, what its reputation is and it’s financial stability, to the extent they can. Unfortunately, sometimes bank failures are very sudden. They keep them pretty quiet.”

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