Also known as:client trust account · trust account · IOLTA
Written by attorneys · grounded in primary & secondary sources — see below
A separate bank account maintained by a lawyer to hold funds belonging to clients or third parties apart from the lawyer's own property. Lawyers may deposit their own funds only in the amount necessary to pay bank service charges on the account. Advance fees and expenses must be deposited into the account and may be withdrawn only as the fees are earned or the expenses incurred.
Sources & Authorities
How it applies
Common Examples
2
Excess Personal Buffer in Trust Account
Charlotte Chung maintains a client trust account for several real estate clients. After the bank imposes wire fees and monthly reporting charges, she deposits a fixed personal sum of fifteen thousand dollars to cover potential overdrafts. Over six months the actual charges total only twelve hundred dollars, yet she never reduces the balance even after observing the pattern. A grievance is filed because the standing reserve exceeds the amount necessary for the permitted purpose.
Advance Fees Deposited and Withdrawn
Cynthia Cortez receives a twenty-thousand-dollar retainer from Coastal Shipping for an upcoming regulatory matter. She deposits the entire sum into her client trust account. As she completes each phase of work she withdraws only the portion earned that month and leaves the unearned balance untouched. When the matter concludes she returns the remaining funds to the client without ever treating the retainer as earned income.
Put it into practice
Test Yourself
10
Practice Questions5
· 8 primary sources
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Cases
Uniform Acts
Model Codes
Course Outlines
Common questions
Frequently Asked
3
How much of a lawyer's own money may be kept in a client trust account?+
A lawyer may deposit personal funds only in the amount necessary to pay bank service charges on the account. A large standing reserve that greatly exceeds actual or anticipated charges violates the rule because it constitutes unauthorized commingling.
Supporting sources
When must advance legal fees be placed in a client trust account?+
Advance fees and expenses must be deposited into the trust account upon receipt. The lawyer may withdraw the funds only as the fees are earned or the expenses are incurred.
Supporting sources
What happens if a lawyer fails to keep client funds separate from personal funds?+
Commingling subjects the lawyer to professional discipline even when no client suffers actual loss. The rules impose strict per se requirements that do not require proof of intent or harm.
Supporting sources
Professional ResponsibilityRegulation of the legal profession · Regulation after admission—lawyer disciplineMPREIntermediate