Compliance Guide
Everything attorneys need to know about managing client funds in compliance with state bar rules — and how IoltaGuard makes it automatic.
Interest on Lawyers' Trust Accounts
IOLTA stands for Interest on Lawyers' Trust Accounts. It is a program that enables attorneys to hold client funds in pooled, interest-bearing accounts. The interest generated by these accounts is remitted to a state IOLTA program, which typically funds civil legal aid services for low-income individuals.
IOLTA accounts are required when an attorney holds client funds that are either too small in amount or held for too short a period to generate net interest in a separate individual account — after deducting bank fees and administrative costs.
All 50 states and the District of Columbia have IOLTA programs. In most states, participation is mandatory for attorneys who hold client funds meeting the criteria above.
ABA Model Rules of Professional Conduct
Rule 1.15 of the ABA Model Rules governs the safekeeping of client property. Every state has adopted a version of this rule. Its core requirements apply to every attorney who holds client funds, regardless of the amount or duration.
Client funds must be held in a trust account that is completely separate from the attorney's personal and operating accounts.
Attorneys must promptly notify clients when funds belonging to them are received.
Client funds must be delivered promptly when the client is entitled to receive them.
Full accounting records must be maintained for every client's funds, including individual ledgers and transaction journals.
An attorney must provide a complete accounting of client funds when requested.
Personal or operating funds may not be deposited into or maintained in the client trust account.
Most state bars require attorneys to reconcile their trust accounts at least monthly. The standard is called three-way reconciliation because it compares three separate totals that must all agree.
Your bank statement balance, adjusted for outstanding checks and deposits in transit.
The running total in your internal trust account register as of the same date.
The total of all individual client ledger balances as of the same date.
All three balances must equal each other.
Any discrepancy must be identified, investigated, and resolved before the reconciliation is complete.
Many violations stem from inadequate recordkeeping, not intentional misconduct.
Depositing personal or operating funds into the trust account, or using trust funds for firm expenses.
Allowing any client's ledger to go below zero — using one client's money for another.
Failing to perform or document the required three-way reconciliation each month.
Not maintaining individual client ledgers, transaction journals, or signed reconciliation worksheets.
Failing to promptly deliver client funds upon demand or at the conclusion of a matter.
Allowing funds to sit in trust without identifying the client and matter they belong to.
IOLTA stands for Interest on Lawyers' Trust Accounts. It is a program that allows attorneys to hold client funds in pooled interest-bearing accounts. The interest earned goes to state legal aid programs. IOLTA accounts are required in most states when holding client funds that are too small or held too briefly to earn net interest in individual accounts.
Yes. Client funds must always be held in an account that is completely separate from the attorney's personal and operating accounts. This is a fundamental requirement of Rule 1.15 in every state.
Most state bars require monthly reconciliation. The reconciliation must be a three-way comparison of the bank statement balance, trust register balance, and sum of client ledger balances. The completed worksheet must be signed and retained.
Most states require retaining trust account records for a minimum of five years after a matter closes or the funds are disbursed. Records include bank statements, cancelled checks, deposit slips, individual client ledgers, transaction journals, and reconciliation worksheets.
Generic accounting software like QuickBooks can be configured for basic trust accounting, but it lacks the safeguards specifically required for legal trust accounts — such as preventing negative client ledgers, generating bar-compliant reports, and producing three-way reconciliation worksheets. Purpose-built software like IoltaGuard is strongly recommended.
Commingling is one of the most serious trust account violations and can result in bar discipline, including suspension or disbarment. It can occur unintentionally — for example, leaving earned fees in the trust account too long or depositing a refund into the wrong account. Proper software and procedures eliminate these risks.
IoltaGuard is purpose-built to keep your firm in full compliance with state bar trust accounting requirements — automatically.
