Multistate Professional Responsibility Exam Practice Question
Rachel, an attorney, receives a payment from her client for legal work. Another party asserts that the client owes them part of that money and demands it. The client denies any obligation to the third party and instructs Rachel to disburse everything to the client. What step must Rachel take regarding the sum that is in contention?
Deduct the lawyer’s fees and give the remainder to the third party
Place the contested portion in a trust account and wait for an agreement
Deduct the lawyer's fees and keep the remainder in a trust account
Distribute the funds to the client after the client's instructions
Attorneys are required to safeguard sums when there is a disagreement over who is entitled. Holding the contested part in a trust account until the dispute is resolved aligns with professional responsibility rules. Paying out the entire sum to the client or another party goes against the requirement to protect contested funds. Using the money to cover fees or expenses before the dispute is settled is improper because it fails to reserve the disputed portion as required.
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What is a trust account in the context of legal practice?
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What happens if an attorney distributes funds from the trust account despite a dispute?
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Why is it important for lawyers to follow ethical guidelines regarding contested funds?