Effective Date: September 1, 2011

The Illinois Supreme Court has approved new trust account rules, effective September 1, 2011, by amending Rule 1.15 of the Illinois Rules of Professional Conduct of 2010. See our article, The Impact of Amendments to IRPC Rule 1.15 for a full description of the changes; see the text of the new rule.

ATG agents will have to review the new rule and determine how to comply. The Real Estate Funds Account (REFA) provisions have moved to subsection (j) and are not changed. However, the new Rule 1.15 makes substantial changes to the general provisions about trust accounts, which apply equally to REFAs. To summarize, the new Rule 1.15 will require the following concerning REFAs:

1. The REFA must be an Interest on Lawyer Trust Account (IOLTA).
2. The REFA must be maintained in a federally or state- authorized bank or savings bank insured by the Federal Deposit Insurance Corporation (FDIC), or an open-end investment company registered with the Securities and Exchange Commission, located in Illinois.
3. The financial institution maintaining the account must have filed with the Attorney Registration and Disciplinary Commission (ARDC) an agreement to report each payable instrument that is presented where the account has insufficient funds, regardless of whether the instrument is honored. A list of financial institutions that have filed such an agreement will be posted at www.ltf.org.
4. The attorney must prepare and/or maintain appropriate accounting records, as follows:
   1. Receipt and disbursement journals for the account
   2. Ledger records for each client's or third party's funds in the account
   3.  Copies of all accountings supplied to clients and third parties showing their funds.
   4. All records with respect to the account (check stubs, checkbook registers, bank statements, deposit statements, checks, records of debits, etc.
   5.  All retainer and compensation agreements with the client
   6.  Copies of all bills to the client for legal fees and costs
   7.  Reconciliation reports for the account quarterly, including a quarterly reconciliation of ledger balances.

The accounting procedures outlined in the revised rule coincide with ATG's requirements for maintaining an Agency Escrow Disbursement Account. See the ATG Basic Forms and Procedures Handbook, Chapter 1. For more, see the ARDC's website, which has an updated trust accounting handbook. There is also an FAQ page that answers many questions and provides the forms for preparing and maintaining required records. ATG's REsource software can provide enormous assistance in meeting the accounting requirements of the new rule, through its check writing, disbursement ledger, and reports and reconciliation tools. We encourage all ATG agents not currently using REsource to examine how it can assist you in meeting your ethical obligations (see About REsource).

At this time, the list of approved financial institutions has not yet been posted, but eventually such a list will be posted at the ARDC website.

There will be a question about to what extent the new rules apply to lawyer-owned title insurance agencies that are separate business organizations from the law firm or office of the lawyer that owns them. ATG is examining that issue and will provide more information on it in the future.

If you have any questions, please contact the Underwriting Department at legal@atgf.com, 217.403.0020, or 312.752.1990.