Yesterday, July 1, 2025, a significant amendment to Maryland Rule 19-301.15 concerning the safekeeping of property took effect. The Rule was amended as follows:
RULE 19-301.15. SAFEKEEPING PROPERTY
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(c) Unless the client gives informed consent, confirmed in writing, to a different arrangement, an attorney shall deposit legal fees and expenses that have been paid in advance into a client trust account and may withdraw those funds for the attorney's own benefit only as fees are earned or expenses incurred. An attorney shall deposit into a client trust account legal fees and expenses that have been paid in advance, to be withdrawn by the attorney only as fees are earned or expenses incurred.
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This change introduces new requirements for how legal fees and expenses paid in advance must be handled under the Maryland Code of Professional Responsibility, mandating their deposit into a client trust account and permitting withdrawal only as they are earned or incurred.
This amendment has far-reaching implications for all Maryland attorneys, regardless of their practice area. It introduces new complexities regarding:
- When Funds Are "Earned": Clearly defining when legal fees are considered earned and can be transferred from the trust account to the operating account.
- Expense Reimbursement: The proper timing and method for reimbursing expenses from the trust account.
- Ethical Compliance: Ensuring strict adherence to the revised rule to avoid potential ethical violations.
- Accounting and Bookkeeping Practices: The need to review and potentially adjust internal accounting and bookkeeping procedures to align with the new requirements.
Until formal guidance on how to interpret the rule becomes available, the most prudent course of action for all Maryland attorneys appears to be to:
- Deposit All Fees and Expenses in Trust: Ensure all advanced legal fees and expenses are deposited directly into your client trust account.
- Disburse Expenses As Incurred: Only disburse funds for expenses as they are actually incurred.
- Leave Fees in Trust Until Earned: Keep all legal fees in your trust account until they are earned according to your fee agreement and the services rendered.
- Maintain Formal Timekeeping: Diligent and formal timekeeping is essential in all cases, even those with flat fee arrangements, to substantiate when fees are earned and to justify withdrawals from the trust account. This practice will be crucial for demonstrating compliance with the "earned" requirement of the new rule.
Further updates will be shared as they become available.