What should a lawyer do if there are disputed funds in a client trust account?

When dealing with disputed funds in a client trust account, the lawyer must adhere to the ethical obligation of maintaining the integrity of the trust account while ensuring that client funds are handled appropriately. Withdrawing undisputed funds and holding the disputed portion until resolution is the correct course of action because it respects the clients' rights to their funds and mitigates the risk of mishandling the disputed amounts.

In this scenario, the lawyer appropriately segregates the undisputed funds, which can be released to the respective party, while retaining the disputed funds in trust until the matter is resolved. This approach prevents any potential claims of misappropriation or commingling of funds, which could lead to ethical violations and liability for the lawyer.

In contrast, keeping all funds until resolved could expose the lawyer to ethical scrutiny and possible disciplinary action for failing to properly handle client funds. Withdrawing funds immediately might jeopardize the interests of one or more parties and lead to accusations of misappropriation. Distributing funds equally would be inappropriate because it disregards the parties' claims to the funds and does not resolve the underlying dispute.

Therefore, the correct answer emphasizes the crucial balance between protecting client interests and maintaining compliance with ethical standards.