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October IOLTA Checklist: Close Out the Year Compliant
📅 It’s October — and Your Trust Account Can’t Be an Afterthought
If you’re a law firm owner, the last quarter of the year isn’t just about tax planning. It’s also a critical time to tighten up your trust accounting (IOLTA) processes before compliance season starts knocking.
Many attorneys coast through Q4, unaware that missteps in trust reconciliation or year-end reporting can lead to ethics violations, disciplinary action, or even license suspension. Whether you’re in California, Florida, Texas, or anywhere in between, the rules are clear—and ignorance isn’t a defense.
October is your window to catch up, clean up, and close out the year on solid footing.
âś… Your October Trust Account Compliance Checklist
Here’s exactly what your firm should be doing this month to stay compliant and prepare for year-end trust account audits:
1. Confirm You’ve Completed Monthly Reconciliations for the Year
You should be reconciling your trust account every single month—comparing your:
- Bank statement
- Client ledger
- Firm-wide trust ledger
đź’ˇ According to most state bar rules, including the California Rules of Professional Conduct (Rule 1.15) and Florida Bar Rule 5-1.2, failure to do this monthly is a compliance breach.
đź“Ť If you’ve skipped a month? Catch up now. Don’t wait until December when you’re juggling court, holiday schedules, and closing client files.
2. Check for Disbursement Errors or Unclaimed Funds
- Are there unclaimed balances from closed matters?
- Did you disburse funds before they cleared?
- Any funds still in trust that belong in your operating account?
You need to resolve these issues before year-end—especially if your state bar requires client notification or escheatment (like California’s Unclaimed Property Law).
3. Review Your Trust Ledger for Red Flags
Run a full-year review of your trust ledger to spot:
- Negative balances
- Matters with no activity for months
- Duplicate or missing transactions
🔍 In states like Michigan, random bar trust audits include a 3-way reconciliation review and may request supporting documentation for 12+ months.
If you’re not audit-ready in October, you’re likely scrambling in December.
4. Ensure Proper Use of Earned vs. Unearned Fees
Review whether you’ve been moving earned fees into your operating account at the right time. If you’re still holding client funds in trust that were earned months ago, that’s a commingling risk and can trigger an ethics investigation.
💬 This is especially common when flat fees or subscription models aren’t tracked properly—our blog on trust accounting for subscription-based legal services breaks it down.
5. Digitize and Back Up Your Records
If your records live in spreadsheets or paper folders, Q4 is the time to move to:
- Practice management tools with trust modules (like Clio, PracticePanther, or CosmoLex)
- Cloud-based bookkeeping that integrates with your trust account
- Secure client ledger storage and reporting formats (PDFs, CSVs)
This not only makes audit season smoother—it protects your firm from staff error, data loss, and ethics violations.
6. Train Your Team (Yes, Even the Admin)
Many IOLTA violations aren’t caused by intentional misconduct—they’re caused by staff who don’t know the rules.
If your receptionist, bookkeeper, or paralegal touches trust-related tasks (deposits, ledgers, billing)—they need training.
7. Prepare Your Year-End Compliance Packet
Start gathering what your state bar will likely request in the event of a year-end audit or random trust review:
- 12 months of 3-way reconciliations
- Client ledgers
- Receipts and disbursement logs
- Trust checks and deposit slips
- Signed fee agreements tied to trust funds
- Accounting of earned vs. unearned funds
Even if you’re not audited, having this ready protects your license and shows you’re running a tight ship.
⚖️ Real Talk: Compliance Is a Practice—Not a Panic
Every year, attorneys face disciplinary action because they treat IOLTA rules like something they’ll “get to eventually.” But when it comes to trust funds, there is no such thing as “late” reconciliation—it’s either on time or it’s noncompliant.
Don’t let small administrative gaps become career-threatening issues.
âś… Need Help Getting Caught Up?
Whether you’re behind on reconciliations or just want to start the new year audit-proof, we’ve got your back. At Prestige, we don’t just do the math—we help law firms build trust systems that protect their license and their peace of mind.
