8 Trust Accounting Mistakes That Put a Law Firm's License at Risk
Sam's List Editorial | 2026-06-23
8 Trust Accounting Mistakes That Put a Law Firm's License at Risk You can lose your license over a missed filing deadline. You can also lose it over a $400 bookkeeping error in your trust account. Featured firm Legal Ease Bookkeeping Brandy Derrick runs Legal Ease Bookkeeping — a Sam's List bookkeeper focused on law firms and property managers. Trust accounting, IOLTA compliance, three-way reconciliations, and owner statements that hold up under a bar or state audit. View profile on Sam's List → “They have made my life a lot easier. For attorneys, managing multiple accounts and especially an IOLTA trust account can be a lot of work. Working with Brandy and her team, it is easy to keep everything straight — every dollar that comes through my accounts is organized and accounted for every week.” — Andrew Deegan · ★★★★★ · Read on Sam's List One of those feels fair. The other one ends careers anyway — and it is the more common path. The most dangerous law firm trust accounting mistakes are almost never theft. They are sloppiness, a misunderstood rule, or a reconciliation nobody ran for six months. Here is the part that should get your attention: the standard your state bar judges you against is not "did you mean well." Under ABA Model Rule 1.15, on which most states base their own version, client funds must be held separate from the lawyer's own property, and you must keep complete records and account for the money on request. Intent is not a defense. The records are. These are the eight attorney trust account errors that draw bar complaints and audits most often — and the IOLTA compliance bookkeeping habits that keep you out of the disciplinary docket. The law firm trust accounting mistakes that draw bar complaints, ranked by how often they bite 1. Commingling earned and unearned money in one account This is the single fastest way to draw a bar complaint, and the line has to be bright. Unearned funds — retainers, settlement proceeds, advance fees you have not yet billed against — belong in trust. Money you have actually earned belongs in your operating account. The moment those two live in the same account, you have a problem, even if every dollar is technically present. Why? Because Rule 1.15 requires client property to be kept separate from your own. A blended account fails that test on its face. The bar does not have to prove you spent a client's money. They only have to prove you didn't keep it separate. 2. Paying operating expenses out of the IOLTA account Your rent is due, the operating...
