You have asked the Professional Guidance Committee for advice in your inquiry of March 1, 1988. The inquiry was presented to the Professional Guidance Committee at its meetings in March and April. This constitutes the formal opinion of the Committee.
Your inquiry asks whether you may retain certain funds held in escrow for a former client (now deceased) as an offset to a judgment for fees against that former client; or, whether these funds must be remitted to the estate for distribution among creditors.
Rule 1.15 of the Rules of Professional Conduct controls a lawyer's conduct with respect to the safekeeping of property. Rule 1.15 mandates that upon receiving funds belonging to a client or a third-party, e.g., creditors, a lawyer must promptly notify such persons thereof and deliver those funds to the client or third-party, except when the lawyer and another person claim an interest in the property. In that event, notification is still required and the property must be kept separate until any dispute is resolved.
In view of Rule 1.15, the Committee has concluded that you must notify the representative of the estate of your former client of the existence of the funds, and the basis of your claim or judgment. Thereafter, you must segregate the funds until your entitlement vis a vis the estate and possible third-parties, if any, is determined.