Trust Accounting for Lawyers: Compliance and Best Practices
Published:
The Critical Nature of Trust Accounting
Trust account mismanagement is a leading cause of attorney discipline. Proper handling of client funds isn't optional—it's an ethical imperative.
Trust Account Fundamentals
What Goes in Trust
- Client retainers
- Settlement funds
- Escrow deposits
- Funds held for third parties
What Stays Out
- Earned fees (must transfer promptly)
- Firm operating funds
- Personal funds
IOLTA Requirements
Interest on Lawyers Trust Accounts rules include:
- Nominal or short-term funds in IOLTA
- Larger amounts in individual client accounts
- Interest remitted to legal services programs
Recordkeeping Requirements
Required Records
- Individual client ledgers
- Deposit slips and receipts
- Disbursement records
- Monthly reconciliations
Retention Periods
Most jurisdictions require 5-7 years of records after matter closure.
Common Violations
- Commingling: Mixing client and firm funds
- Borrowing: Using client funds for firm expenses
- Delayed transfer: Not moving earned fees promptly
- Poor records: Inability to account for funds
Best Practices
- Reconcile monthly
- Transfer earned fees promptly
- Maintain detailed ledgers
- Use dedicated trust accounting software
Automate trust accounting compliance. IntelliBill ensures proper fund handling.
Comments
No comments yet. Be the first to comment!
Your firm wrote off revenue last year. Find out exactly how much.
Get the free Billing Leak Calculator - a 10-minute audit that shows where your billable hours disappear. Plus weekly billing optimization tips from legal billing experts.
No spam. Unsubscribe anytime. Free for solo attorneys and small firms.