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Don’t Be Embarrassed: Step Up To The Plate And Learn To Do Your IOLTA Trust Accounting

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In reading a recent issue of Massachusetts Lawyers Weekly, I was struck by the number of public reprimands that resulted from the violation of simple rules related to properly maintaining IOLTA accounts. While I cannot know the reasons why each attorney failed to comply with IOLTA accounting rules, several factors may have contributed to these violations: (1) a general lack of knowledge of the requirements for the administration of IOLTA accounts, as laid out in the Massachusetts Rules of Professional Conduct; 2) a lax approach to time management; 3) a failure to administer trust accounts properly based on the fact that the attorney is overburdened, and overwhelmed; and/or, 4) the flowering of a careless attitude, toward following the rules of professional conduct, and with respect to the adoption and implementation of best business practices.However, it is not my intention to preach; neither do I wish to be an apologist.Rather, I want to focus on how other attorneys can make sure that they do not fail in complying with the simple rules required in accounting for other people’s money.

The accounting issues represented in the reprimands I read were truly not noteworthy; rather, they involved trust accounting basics; they were:

-A failure to reconcile the IOLTA account every sixty days, as required by Mass. R. Prof. C. 1.15 (f)(1)(E);

-A failure to calculate a running balance, to keep a simple, chronological check register of each transaction, with a current account balance, as required by Mass. R. Prof. C. 1.15 (f)(1)(B);

-A failure to keep individual client ledgers, with a list of every transaction and a running balance for the individual client, as required by Mass. R. Prof C. 1.15 (f)(1)(C); and,

-Commingling of client funds and private funds, or otherwise negligently misusing client funds in an IOLTA account, in violation of Mass. R. Prof. C. 1.15(b).


So, let’s talks about a few simple rules for managing IOLTA accounts that I suggest to all attorneys:

(1) SACRED. You must treat as sacred the money and property given to you in trust, and you must not take such as your own until it is earned.

(2) ACT. If you do not know what an IOLTA account is, or what three-way reconciliation means, or how to conduct a three-way reconciliation, learn now.This is a mission-critical, operational imperative for every attorney who holds any funds or property in trust for a client.If you don’t act now, you place your professional reputation on the line, your business success at risk and you clearly show that you do not care about your business.

(3) HIRE. If you understand the meaning and import of the above two rules, but you still don’t want to do the work, hire an expert to do it for you.

Perhaps not surprisingly, I have some suggestions about where you might educate yourself with respect to compliance with your professional responsibility to render your IOLTA accounts appropriately. First, read Mass. R. Prof. C. 1.15 on Safekeeping Property. As you’re reading through, you’ll find that you can keep sufficient funds in the trust account to pay bank charges (generally, this seems to mean about $150 or less). You’ll also have access to explanations of the accounting rules, operational requirements and required accounts and records. The question, then, becomes: How do you implement what you have learned by reading the rule? Well, there are some surprisingly good resources out there to help you to figure that out.


But, please, ACT now. Don’t wait until IOLTA training is suggested by bar counsel. Sign up for an IOLTA training course offered by the Office of Bar Counsel (co-sponsored by the Massachusetts Bar Association and the Boston Bar Association). These free, one-hour programs, held monthly, feature discussion of IOLTA rules, generally, and provide excellent information on keeping written trust account records. Upcoming program dates are available here.To register for a course, call the Office of Bar Counsel at (617) 728-8750 and ask about “trust account program registration”.


Other resources for IOLTA accounting information include the Massachusetts IOLTA Committee website, where you can find a free PDF copy of “Managing Client Funds and Avoiding Ethical Problems”, available here. The Massachusetts IOLTA Committee also provides a PDF copy of an IOLTA account opening form, a list of approved IOLTA depositories and a PDF copy of the IOLTA guidelines.

Obviously, it’s difficult to find resources from more impressive providers than the Board of Bar Overseers/Office of Bar Counsel and the Massachusetts IOLTA Committee; however, LOMAP has collected some resources, as well, to supplement those. If you browse our Lending Library titles, you’ll find a number of books on managing trust accounts and using software for trust accounting. Two episodes of Jared’s podcast, the “Legal Toolkit”, have focused on IOLTA accounting; you may find “IOLTA Accounting: Part I” here, and “IOLTA Accounting: Part II” here. We’ve also offered a general resources post at the blog, here.

Now, even though many attorneys use Quicken or QuickBooks for IOLTA account management, this does not mean that these softwares are the best suited for that purpose. (Although, you can find the guide: “Maintaining Lawyer Trust Accounts with Quicken 2002 Basic” through the Mass. R. Prof. C. 1.15 and a book covering the use of QuickBooks for trust accounting available through our own lending library.) These just happen to be the programs that attorneys most commonly use. There are legal-specific products that can make trust accounting compliance easy, because the products have been developed for that specific purpose (and have not been retrofit for that purpose, as Quicken and QuickBooks need to be, by you). Good examples of software that you can use to make trust accounting easier are: EasySoft’s Easy Trust; Tabs3 Trust Accounting; Amicus Accounting 2010; and, PCLaw. SaaS case management software providers, like Clio and RocketMatter, have also added trust accounting capability.

Now, if you’ve read about all of these resources, and you’ve decided that you really have better things to do with your time than spending your days bookkeeping, HIRE an excellent bookkeeper, or an accountant, to do this all for you.Take that person to the free IOLTA training program with you.Keep in mind, however, that the hiring and utilization of a bookkeeper does not absolve you from responsibility.Errors and omissions related to your trust accounting are still, ultimately, yours. As part of your oversight, then, make sure that account reconciliation is done every thirty (recommended) to sixty (required) days.

And, above all, treat other people’s money as if it is SACRED.

. . .

Written by Rodney Dowell. We owe a sincere thank you, and a debt of gratitude, to our intern, and Suffolk University Law School student, Norman Murray, for his research assistance in the drafting of this post.

CATEGORIES: Uncategorized
TAGS: iolta

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