Law firm trust accounting overview

This post is meant for non-lawyers and people who want a general understanding of the topic. Lawyers should rely on more specific sources including their state bar associations. Rules vary by state and jurisdiction. These are just general principles.

  1. Client funds that are not earned legal fees must be kept in separate accounts and not commingled with the lawyers’ and law firms’ accounts.
  2. Only approved institutions may be used to hold the trust funds.
  3. In some cases a separate account is required for each client. In other cases smaller amounts of trust fund balances may be combined into a single trust fund account for multiple clients.
  4. Trust fund accounts may not charge fees.
  5. Interest on trust fund accounts goes to neither the lawyer nor the client but in most cases goes to state-specific programs pay for legal services for the underprivileged.
  6. Trust fund accounting requires specific types of reports distinguished by client, matter and date.
  7. Jurisdiction-specific rules for transferring funds from one account to another must be followed.
  8. The consequences for violating trust fund accounting rules are severe, including possible disbarment.


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