Key Components of Trust Account Recordkeeping

Transaction Register (Firm-Level Trust Ledger)

• Date of transaction
• Check number or electronic transfer ID
• Client or matter associated with the transaction
• Purpose of the deposit or disbursement
• Running balance after each transaction

Keep it updated in real-time—don’t wait until the end of the month to enter transactions.

Never let the trust account balance drop below the total of all client balances—if this happens, you’ve overdrawn a client’s funds, which is a serious violation.

Use legal-specific accounting software like Clio, LeanLaw, or QuickBooks for Lawyers to automate tracking.

Individual Client Ledgers

• Client name and matter number
• Every deposit, withdrawal, or transfer related to that client
• Date and purpose of each transaction
• Running balance of the client’s funds

NEVER combine client funds—each client’s balance should be clear and separate.

Label every transaction correctly—mislabeling can lead to compliance issues.

Review ledgers before making withdrawals—confirm the client has enough available funds before disbursing money.

Deposit Records & Retainer Tracking

• Copy of the check, wire transfer confirmation, or electronic deposit receipt
• Bank deposit slip with date and total amount deposited
• Breakdown of funds by client (if depositing funds for multiple clients at once)

Deposit funds ASAP—most bar associations require deposits within one to three business days.

Keep a clear record of advanced retainers—differentiate between funds already earned and those not yet earned.

If you receive a settlement check with multiple payees, do not deposit it until all parties endorse it.

Disbursement & Withdrawal Records

• Date of withdrawal
• Amount withdrawn
• Check number or electronic transaction details
• Client or case the funds relate to
• Reason for withdrawal (e.g., payment to vendor, earned fees transfer, settlement payout)
• Supporting documents (invoice, settlement agreement, etc.)

Only withdraw funds once they are earned or due—taking money out before it’s earned is misappropriation.

Keep proof of all transactions—attach invoices, settlement agreements, or written client authorization.

Use sequential, pre-numbered checks for trust account payments to maintain order.

Monthly Three-Way Reconciliations

• Bank Statement Balance – The ending balance on your official bank statement
• Trust Account Register Balance – The balance on your internal transaction register
• Total Client Ledger Balances – The sum of all individual client ledgers

All three numbers MUST match! If they don’t, you have a problem that needs immediate correction.

Schedule reconciliations on the same date each month (don’t fall behind!).

Investigate discrepancies immediately—even a small $5 error could indicate a bigger issue.

Save all reconciliation reports—bar auditors may request these records during an audit.

How Long Should Trust Account Records Be Kept?

• All trust account records: 5-7 years after case completion
• Client ledgers & statements: 5-7 years
• Deposit & disbursement records: 7 years
• Reconciliation reports: 5-7 years
• Electronic records & backup files: 7+ years

Check your state’s bar rules for specific retention requirements.

Store records securely, whether in physical files or encrypted cloud storage.

Have a backup plan—never rely on a single system for storing financial data.

• Customized Recordkeeping Solutions: Tailored to meet the unique needs of your practice.
• Compliance Assurance: Ensuring adherence to all applicable regulations and standards.
• Training and Support: Empowering your team with the knowledge and tools necessary for effective trust account management.