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Trust Account Rules Every Lawyer Should Know: Spotlight on Kansas and Texas
Listen, no one wakes up excited to learn about trust account rules—but knowing them could save your law license.
One slip-up? You could face bar complaints, fines, or even disbarment. And if you’re practicing in Kansas or Texas, there are some unique rules you need to know.
We’ll break them down in plain English—plus, we’ll look at real-life penalties for attorneys who got it wrong. Let’s make sure that’s never you.
Trust Account Rules That Can Make or Break Your Career
Here’s the deal: Trust accounts are sacred. Messing with client funds—even by accident—is one of the fastest ways to get in trouble. Here are the non-negotiable rules you need to follow:
Client Money Stays in a Trust Account, Not Your Business Account- Your firm’s money never belongs in a trust account.
- Client retainers, settlements, and other unearned funds must be kept in a separate account.
Meticulous Record-Keeping is Required- You need a ledger for every single client with exact balances.
- Every deposit and withdrawal must be recorded and match up perfectly with your bank statements.
Withdraw Only When Earned (No “Borrowing” Allowed!)- You can’t withdraw client money until it’s earned—period.
- Even if you “plan to put it back,” this is considered theft.
Reconcile Your Accounts Monthly- If you don’t compare your bank statement, general ledger, and client ledgers every month, you’re already out of compliance.
- Not doing this? You’re risking accidental mismanagement, which is just as bad as intentional fraud in the eyes of the bar.
Now, let’s talk about how Kansas and Texas attorneys need to handle trust accounts—and the serious risks if you don’t.
Kansas IOLTA Rules: Why It’s Optional (And Why Most Attorneys Still Join)
Here’s something interesting—Kansas attorneys are NOT required to join the IOLTA program. Unlike many states, you can opt out. But here’s why most still choose to participate:
What is IOLTA?- When attorneys hold small or short-term client funds, the money doesn’t earn enough interest to benefit the client.
- Instead of sitting there unused, the interest goes to fund legal aid services in Kansas.
Who Joins?- Attorneys who don’t want the hassle of setting up a separate interest-bearing account for every small client deposit.
- Lawyers who believe in funding legal aid programs while staying compliant.
How to Opt Out- If you choose not to participate, you must file a declination form with the Kansas Supreme Court and set up a non-IOLTA trust account instead.
Full Kansas IOLTA Guidelines: ksbar.orgTexas IOLTA Rules: What Every Attorney Must Follow
Now, Texas is different. IOLTA participation is NOT optional—if you hold client funds, you must use an approved IOLTA account. In Texas, the management of client trust accounts is governed by Rule 1.14 of the Texas Disciplinary Rules of Professional Conduct.
The Must-Follow Rules for Texas Attorneys
Mandatory IOLTA Compliance – If you handle nominal or short-term client funds, you must put them in an IOLTA account. Annual Certification Required – Every year, Texas attorneys must certify compliance to the Texas Access to Justice Foundation (TAJF). Strict Record-Keeping – You must maintain detailed trust account records for at least five years. Penalties for Non-Compliance
Attorneys who fail to comply with Texas IOLTA rules face serious consequences:
Fines & Mandatory Restitution – Mismanaging client funds could mean paying back thousands (or more). Suspension or Disbarment – Attorneys who don’t properly maintain IOLTA accounts face potential suspension. Criminal Charges in Extreme Cases – If client funds are used inappropriately, this can escalate to fraud charges. Full Texas IOLTA Guidelines: teajf.orgReal Attorneys Who Got It Wrong (And Paid the Price)
These aren’t just “what-if” scenarios—lawyers lose their licenses over trust account mistakes every year. Here’s what happened to two attorneys who didn’t take the rules seriously:
The Kansas Attorney Who “Borrowed” Client Funds- A Kansas lawyer moved client trust money into his operating account “just until a check cleared.”
- A bar audit discovered the missing funds, and even though he replaced the money, he was disbarred for mishandling trust funds.
The Texas Lawyer Who Ignored Monthly Reconciliations- A small firm in Texas never reconciled their trust account and assumed “the bookkeeper had it covered.”
- When the firm was audited, they were missing thousands in client funds—not because of theft, but because of bad record-keeping.
- The partners were suspended from practice for 18 months.
Lesson? Even if you’re not stealing, BAD RECORD-KEEPING is just as dangerous. to review it.
Need a Second Look? Prestige Accounting & Consulting Has Your Back
Listen, no one became a lawyer just to stress about bank statements and ledgers. But getting trust accounts wrong? It can end your career.
That’s where Prestige Accounting & Consulting comes in.
We help law firms stay compliant—so you never have to worry about an audit. We handle trust account reconciliations for you—accurately, efficiently, and stress-free. We make sure you meet all Kansas & Texas IOLTA rules—so you stay in good standing with the bar. Don’t wait until there’s a problem. Let’s set up a trust account check-up today and make sure you’re 100% compliant. Book a consultation now!
