For solo attorneys, no part of practice management carries more regulatory weight than the client trust account.
It is the one part of practice management where a simple bookkeeping mistake can become a disciplinary matter — no dishonesty required.
This article covers what belongs in trust, the rules that matter most, and the mistakes that get solo attorneys into trouble.
What an IOLTA Account Is
IOLTA stands for Interest on Lawyers' Trust Accounts.
It is a pooled trust account for client funds that are too small in amount, or held too briefly, to earn meaningful interest for the individual client. The interest is remitted to state programs, which typically fund legal aid.
Most solo attorneys hold client funds in a single IOLTA account, with internal records tracking each client's share. Larger or longer-held amounts may belong in a separate account for that specific client, depending on state rules.
What Belongs in Trust — and What Doesn't
Funds that generally belong in the trust account:
- Unearned retainers and advance fee payments
- Advanced costs the client has paid but you have not yet spent, such as filing fees
- Settlement proceeds before disbursement
- Funds owed to third parties, such as lienholders or medical providers
Funds that do not belong there:
- Fees you have already earned
- Operating money
- Personal funds, beyond the small amount some states allow for bank service charges
The One Principle Behind Every Rule
Client money is not your money until it is earned.
Nearly every trust accounting rule is a consequence of that sentence. You cannot deposit earned fees into trust, because that hides your money among client funds — commingling. You cannot pay yourself from trust before fees are earned, because that spends money that is still the client's.
When in doubt, ask whose money it is. If the answer is not clearly yours, it stays in trust.
Keep a Ledger for Every Client
The trust account is not one pool of money. It is a collection of individual client balances that happen to share a bank account.
That means you need a per-client ledger showing every deposit, every disbursement, and a running balance.
Two rules follow:
- No client's ledger may ever go negative. A negative balance means you spent another client's money.
- The bank balance is meaningless on its own. What matters is that it equals the sum of the client ledgers.
Reconcile Three Ways, Every Month
The standard discipline is a monthly three-way reconciliation. Three numbers must match:
- The bank statement balance, adjusted for outstanding items
- Your trust journal — the running record of all deposits and disbursements
- The sum of all individual client ledger balances
If they match, your records are coherent. If they do not, you have found a problem while it is still small.
Do the reconciliation monthly, and keep a record showing you did. In a disciplinary inquiry, documented reconciliations are the difference between a bookkeeping question and a compliance failure.
Common Trust Accounting Mistakes
- Paying yourself early. Fees leave trust only after they are earned — and in many states, only after the client has been invoiced or notified.
- Letting a ledger go negative. Usually a sign that one client's costs were paid with another client's funds.
- Parking earned fees in trust. Leaving earned money in the account is commingling too, even though it feels conservative.
- Bank fees hitting the trust account. Service charges should come from operating funds or the small buffer your state permits.
- Ignoring residual balances. Small leftover amounts must be returned to clients, not left to age.
- Thin records. Every disbursement should trace to a client, a purpose, and a document.
State Rules Vary — Know Yours
The ABA Model Rules set the baseline: hold client property separately, keep complete records, and preserve them for five years after the representation ends.
But trust accounting is regulated state by state. Reconciliation requirements, record formats, overdraft reporting, and IOLTA eligibility all differ, and most state bars publish a trust accounting handbook that serves as the controlling reference.
Nothing in this article is legal or ethics advice — your state's rules govern.
How Time59 Fits Into Trust Compliance
Time59 includes trust accounting built for this discipline: per-client trust ledgers, trust balances displayed on invoices, and a clean record of every deposit and disbursement.
Evergreen trust accounting automates replenishment — when a client's trust balance falls below the threshold you set, the next invoice includes a replenishment request automatically.
And because trust activity and billing live in one system, applying trust funds to an invoice is a recorded, traceable event — the kind of consistency described in solo attorney best billing practices.
Final Perspective
Trust accounting has a reputation for danger it does not quite deserve. The rules are strict, but they are mechanical.
A ledger for every client, a three-way reconciliation every month, and the discipline to move money only when it is earned will keep a solo practice compliant year after year.
The attorneys who get into trouble are rarely the ones who found the rules confusing. They are the ones who stopped doing the bookkeeping.
FAQ
What is an IOLTA account?
An IOLTA (Interest on Lawyers' Trust Accounts) account is a pooled client trust account for funds too small or held too briefly to earn net interest for individual clients. The interest is remitted to state programs that typically fund legal aid.
Can I keep any of my own money in a client trust account?
Generally only the small amount your state permits to cover bank service charges, where allowed at all. Anything more is commingling — and earned fees should be moved out of trust promptly once you are entitled to them.
How often should a solo attorney reconcile the trust account?
Monthly is the standard discipline: reconcile the bank statement, your trust journal, and the sum of client ledgers so all three agree, and keep documentation of each reconciliation. Some states mandate specific practices, so check your state bar's rules.