What ABA Model Rule 1.15 Requires — and What Most Law Firms Get Wrong
Sam's List Editorial | 2026-06-06
Attorney trust account violations are the single most common reason lawyers face disciplinary proceedings. The rule is not ambiguous. The accounting is not technically complex. Yet the violations keep happening — almost always at small firms, almost always by attorneys who didn't realize they were doing anything wrong.
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ABA Model Rule 1.15 sets the baseline for how attorneys must handle client funds and property. Most states have adopted it with minor variations. The core requirements are clear: keep client funds separate, maintain accurate records, and be able to account for every dollar at any moment.
The problem isn't that attorneys don't know the rule exists. It's that they don't fully understand what compliance actually requires at the bookkeeping level — and they're using accounting practices that look compliant but aren't.
What Rule 1.15 Requires at Its Core
The rule states that a lawyer must hold client property separately from the lawyer's own property. Client funds must be kept in a separate, identifiable account at a financial institution — typically an IOLTA (Interest on Lawyers' Trust Accounts) account. Funds belonging to the lawyer must not be in that account.
This sounds simple. It becomes complicated in practice because of what "separate" really means and because trust accounts see a high volume of transactions — client retainers received, fee draws taken, settlement proceeds deposited, client disbursements made — all of which must be tracked at the individual client level.
The rule also requires that records be kept in a manner that accurately identifies all client funds, is available for inspection, and is maintained in a reasonably organized format. The specific recordkeeping mechanics are largely determined by state implementation — most states have more detailed requirements than the model rule itself.
The Three-Way Reconciliation Requirement
Most state implementations require monthly three-way reconciliation of the trust account. This is where most small firms either don't comply or don't understand what they're required to do.
Three-way reconciliation means three numbers must agree every month:
- Bank statement balance — the balance on your trust account bank statement at month-end
- Trust account book balance — the running balance in your accounting system for the trust account
- Sum of individual client ledger balances — the total of every client's individual trust balance added together
All three numbers must match. Exactly. If they don't — even by $1 — there's a discrepancy that must be found and corrected.
The reason this matters: a firm could have a correct overall bank balance while still having individual client shortages. Firm A holds $50,000 in trust. Client 1 should have $30,000, Client 2 should have $20,000. The bank statement says $50,000 — looks fine. But Client 1's ledger shows $25,000 and Client 2's ledger shows $25,000 because someone drew a fee from the wrong client matter. The bank reconciles. The per-client ledgers don't match what clients are owed.
That scenario is a violation. The bank balance being correct doesn't make it not a violation.
Commingling: The Bright-Line Rule
Commingling — mixing personal or firm funds with client funds — is the most straightforward way to violate Rule 1.15, and it's more common than it should be.
The rule draws a bright line with no minimum threshold. Any personal or firm funds in the trust account is commingling, regardless of amount or intent.
The most common commingling scenario: a lawyer deposits a fee retainer into the trust account, does the work, and doesn't move the earned fee out before drawing on it. Earned fees belong in the firm's operating account. The moment a fee is earned, it should be transferred out of trust. Leaving it in trust — even briefly, even by oversight — is commingling.
A less obvious scenario: keeping a small cushion of firm funds in the trust account "to cover bank fees." Some states permit a minimal amount to cover fees. Most states prohibit it entirely. Know your state's rule.
There's no intent element in the violation. An honest bookkeeping mistake that results in firm funds sitting in the trust account is still a violation. This is why the recordkeeping and reconciliation mechanics matter — they're the controls that catch errors before they become disciplinary events.
What Records Are Actually Required
Rule 1.15 and its state implementations require that trust account records be current, complete, and available on demand. In practical terms, this means:
Separate client ledgers. For every client with funds in trust, there must be a running ledger showing every receipt and disbursement affecting that client's balance, with dates, descriptions, and a running balance after each transaction.
A trust account journal. A chronological record of every transaction in the trust account, regardless of client — every deposit, every check, every transfer, with dates and references.
Bank statements and reconciliations. Monthly reconciliations with all three components of the three-way reconciliation documented and retained.
Supporting documentation. Cancelled checks, deposit slips, and records of electronic transfers.
Most states require these records to be retained for 5–7 years. Some require longer retention for certain matters.
The standard of "available for inspection on demand" is real. A state bar audit can happen with little notice. If your records aren't current and organized enough to produce them on demand, you're exposed.
What Most Firms Actually Do Wrong
The most common failure pattern at small firms: using a single trust account with client matter identification tracked only in the memo field of checks and deposits, without per-client ledger balances maintained in accounting software.
This approach usually produces a correct overall bank balance. The firm can reconcile the trust account to the bank statement and the numbers tie. But there are no individual client ledger balances. There's no way to verify that each client's funds are intact without manually reconstructing every transaction by client — which no one does monthly.
The per-client shortages in this scenario are only discovered when a client asks for their money back, when a disbursement check bounces because someone drew from the wrong matter, or during an audit.
The fix is straightforward. QuickBooks, Clio, CosmoLex, and other legal accounting platforms support per-client trust ledgers. The accounting structure isn't complicated. What's required is that every transaction be posted to the correct client matter in real time, and that monthly three-way reconciliation actually be run and documented.
A bookkeeper who understands legal trust accounting is not interchangeable with a general business bookkeeper. The rules are specific, the stakes are high (a trust account violation can result in suspension or disbarment), and the reconciliation process is distinct from standard business bookkeeping.
If your firm's trust account process isn't producing documented, per-client three-way reconciliations every month, the most reviewed legal bookkeeping specialists are on Sam's List. Legal Ease Bookkeeping works specifically with law firms navigating IOLTA compliance.
General information only, not legal or tax advice. Consult a qualified professional for your specific situation.