What is a trust account in a law firm?

It’s quite obvious that if you are a professional dealing with legal matters, or to be more precise an attorney, the need to render the service flawlessly and comprehensively is inevitable. Doing so will surely earn the profession credibility, and most importantly, the client’s trust. Negligible ambiguity is the key to attracting success in the legal sphere. One of the expectations from a great attorney dealing with finances and matters pertaining to financial transactions is having a neat knowledge of trust accounting for attorney’s client. This blog will help you gain basic clarity regarding trust accounting and how you keep accounting for a trust.

What is a Trust Account?

To understand the need for a Client Trust Account let’s see the basic definition of a Trust Account. A Trust Account is a monetary account that an attorney needs to cater to the requirements of keeping the money on behalf of his or her clients or third parties. In simpler words, Trust accounting is the monitoring of the funds an attorney/lawyer has received on behalf of or belonging to a client or third party. This may also be understood as the practice of bookkeeping of bank trust accounts under state requirements. At the end of the practice, based on your final calculation and work, the ultimate invoice will be sent to the client for transactions. To avoid legal pitfalls, Trust accounting allows the law professional the safe provisioning of client resources.

Benefits Of Trust Accounting for Attorney’s Client

Even a minor negligence on the part of finance lawyers/attorneys can result in disbarment. When handling clients’ trust accounts, If any attorney or lawyer fails to comply with state bar rules one can lose the law license. That’s why a good client trust accounting comes into play.
The client funds are recorded and handled meticulously in this legal accounting exercise. When handled properly a clean and detailed record of funds shows that you do have and maintain ethical behaviors resulting in the enhancement of your professional score and at the same time decreasing the possibility of legal troubles. To have smooth functioning the law firm should have a set of rules and procedure trust account rules for professional services delivery.

Mistakes To Avoid In Client Trust Accounting

Now have a look at the mistakes that could occur while keeping the Client’s Trust Account. Client trust accounts are financially and legally complex. Factors like a huge number of rules, the indefinite nature of law statements, and irregular updates from the professional’s side are some direct or indirect obstacles that can make accounting troublesome. Here are some practices to avoid while keeping a Client Trust Account.

  • Commingling funds: In financial and legal matters, the commingling of funds can be defined as fund mixing which is to be kept separate while accounting. These should be ethically and legally correct. Doing otherwise may dent the law firm’s reputation and can have serious consequences. This point also includes the mixing of Client and Business Accounts while dealing with the transaction or funds movements.
  • Neglecting the records’ accuracy: keeping and writing the data and recording the data accurately altogether is a different thing. Accuracy of the records is an important part of trust accounting for lawyers after the detailed records aspect. Detailed record keeping includes writing all transactions, including deposits, transfers, and withdrawals.
  • Considering deposits as Income: There is a great need to define every transaction and its nature. Sometimes neglecting the details may invite some silly incidents just because of considering the deposit as a professional’s income.

Best Practice For Trust Accounting:

To start with, the tracking of the monetary transaction or movement of funds is a must. Whoever is bookkeeping the Trust account should look meticulously at the funds moving into and out of the trust account. This will ensure that the trust accounting rules are not being violated. There should be a clear distinction on the lawyers’ part regarding the operating and personal funds. The operating fund of the law professional should be separate from a client’s unearned funds.

  • The first and foremost thing is to create appropriate Checks and Balances. Since this practice has universal applicability it also applies to client trust accounting. The significant checks and balances may be designed if feedback from clients is considered. So Law professionals/attorneys are advised and required to keep clients informed on the status of their trust account.
  • It is very generic that in today’s time, the leverage of digital advancement is a must to keep up with the pace of a dynamic economy. That’s why professionals should opt for Legal software that can be a powerful tool in bookkeeping and track recording.
  • Always, yes ALWAYS refrain yourself making any ordinary transaction as your earning. There is a high chance of vulnerability if one does not follow the basic funda of ‘If You Haven’t Earned It, Don’t Touch It’. Ignoring the need to separate the money as their belonging may be disastrous in accounting. To be more clear, Never consider and calculate the current liability as your asset and mistakenly update your account with clients’ money.


Undoubtedly client trust accounting can be complex and give headaches for careless professionals. Moreover, heedlessness may invite some very serious repercussions that why attorneys and lawyers need to be aware of pertinent legal facts when dealing with these accounts. However, you can learn and apply some basic ABCs of trust accounting to make it more fruitful and eliminate any chance of counter-productive incidents.

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