This is a response to a recent inquiry on whether a cosignatory is permitted on attorney trust, escrow and special accounts in New York:
We have found that neither the Rules of Professional Conduct nor the New York State Bar Association (“NYSBA”) Committee on Professional Ethics have addressed whether a cosignatory attorney is permitted on attorney trust, escrow, and special accounts. Nevertheless, relying primarily on the Planning Ahead guide, our position was and is that a cosignatory is permitted on all attorney accounts as supported by the discussion below.
Rule 1.15(b)(1) of the Rules of Professional Conduct addresses that a lawyer or law firm shall maintain separate accounts for funds belonging to another person. 1.15(e) entitled “Authorized Signatories” states that “Only a lawyer admitted to practice law in New York State shall be an authorized signatory of a special account” (emphasis added). Lastly, 1.15(g), entitled “Designation of Successor Signatories” directs that upon the death of a sole signatory, an application may be made to the Supreme Court to designate a successor signatory on trust, escrow, or special accounts. The Rules of Professional Conduct do not directly address the situation of naming a cosignatory when planning for an inability to practice.
However, one can infer that there are situations where multiple signatories on such accounts are permitted. For instance, where these accounts are in the name of the law firm, multiple attorneys may be authorized signatories as members or employees of the firm. The Rules state that an admitted New York Lawyer shall be an authorized signatory, and one may infer that each account does not require only one signatory. Lastly, there are situations where there are sole signatories and upon their death applications may be made (not “shall”) to the Supreme Court for the designation of a successor signatory, and one may infer that it is discretionary whether the application is made, not compulsory. This does not address a situation where the sole signatory is disabled or has provided for a cosignatory.
The NYSBA Committee on Professional Ethics has not addressed a situation where there are cosignatories or successor signatories on attorney trust, escrow, and special accounts. Opinion #693 however, concludes that “A lawyer may allow a paralegal to use a signature stamp to execute escrow checks from a client trust account so long as the lawyer supervises the delegated work closely as provided in this Opinion and exercises complete professional responsibility for the acts of the paralegal.” It may be safe to assume that a lawyer may delegate the authority to use a signature stamp to another lawyer under similar conditions regarding supervision and responsibility for the acts. This still does not address a situation where the sole signatory is disabled or dies and is unable to exercise the requisite supervision and responsibility, or has provided for a cosignatory.
The Planning Ahead guide was prepared by The NYSBA’s Committee on Law Practice Continuity in 2005. Despite referencing the New York Disciplinary Rules (the Rules of Professional Conduct, which replaced the Disciplinary Rules released in 2009), it is the primary authority on planning for an inability to practice by a solo practitioner in New York State. This guide addresses numerous situations where it recommends authorizing an Assisting Attorney to access the Planning Attorney’s bank accounts, including attorney trust, escrow, and special accounts. Below is an excerpt, in whole, of the guide’s treatment of Trust Accounts (pg. 4):
If you do not make arrangements to allow another attorney access to your office trust account(s), your clients’ money must remain in trust until a court authorizes access. This is likely to cause delay and put your client and you in a difficult position if you are unable to conduct your practice. On the other hand, allowing access to your trust account(s) is a serious matter. If you give access to your trust account(s) and that person misappropriates money, then your clients will suffer, and you may be held responsible. There is no simple answer to this dilemma and other important decisions which you must make regarding your trust accounts (See “FAQ,” Appendix A).
First, you must decide whether to appoint a co-signatory prior to your disability, or to grant access to the account at a specified future time or event. If you decide to allow access to your trust account(s) by your Assisting Attorney all of the time, then you can authorize the attorney as a signer on your accounts and contact the bank to sign all appropriate cards and paperwork. This allows easy access on the part of your Assisting Attorney if, for example, you are unexpectedly delayed on a trip. However, it opens the door to a host of other risks, as you are unable to control the signer’s access. If you prefer not to have a co-signatory on your trust account while you are able to conduct your practice, you may nevertheless plan in advance and give such authority in the future. One option is to give your Assisting Attorney a power of attorney that takes effect upon your disability and includes as a power the authority to withdraw funds from your trust account (See Appendix H). You may want to leave the executed power of attorney with a third party whom you trust to insure that it will not be released until the specified event, e.g., disability, occurs.
Another option is to give your Assisting Attorney access to your trust account in an agreement or consent and authorization form (See Appendices F and G). Again, the power may be conditioned upon the occurrence of a specified event. However, unlike a power of attorney, which ceases upon death, the agreement can authorize your Assisting Attorney to operate your trust account upon and after your death. In such case, this power may be used by your Assisting Attorney in winding up your practice.
Whichever method you choose, remember to check with the bank that holds your trust account to insure that your power of attorney or agreement is acceptable to it and to sign additional documents that may be required. New York Disciplinary Rules have detailed procedures which should be reviewed carefully by you and your Assisting Attorney to ensure that the appropriate steps are taken to safeguard these funds and to have the funds delivered to the appropriate parties on a timely basis. (See DR 2-110(A) & 9-102 and NYSBA publication Attorney Escrow Accounts).
The New York State Bar Association’s Comm. on Law Practice Continuity, Planning Ahead 4-5 (The New York State Bar 2005).
Here, according to the principal NYSBA resource on the topic, it is permitted to authorize a cosignatory on attorney trust, escrow, and special accounts. We find it unlikely that the NYSBA would make such unauthorized recommendations or that a disciplinary committee would discipline an attorney for following the NYSBA’s own recommendations in its Planning Guide.
We believe that it is better to plan than to leave clients’ unprotected. If an attorney wishes to grant such authority, he or she may do so immediately, at a later date, or upon the occurrence of a specified event. In either case, we recommend (as consistent with the guide) that the agreement, or the power of attorney, should be presented to the financial institution where the funds are kept, and that the attorneys comply with those procedures the financial institution requires. If an attorney does not want to grant such authority to another attorney, then the agreement between the attorneys should be presented in support of the application to the Supreme Court in order to expedite the designation process.
It is our opinion that appointing cosignatories for the purposes of contingency planning is not only permitted, but encouraged by the NYSBA. However, we empathize with those attorneys that may choose not to do so and who would rather utilize the process whereby the Supreme Court designates a successor signatory (out of an abundance of caution). The choice is that of the Planning Attorney. In either event, this should not be a reason not to plan!