Trust account record requirements vary by State Bar, but all records help keep you compliant. Why? Because the funds in a trust account don’t belong to you, but you’re responsible for keeping track of every cent, including interest.
Bank Ledger and Records
Like a highly detailed bank account statement, this ledger notes the when, how much, and why of all transactions. And yes, the why is what makes it so detailed – payor, payee, purpose, and client identification are all needed.
In addition to the bank statement that you should receive from your bank every month, you also want to keep deposit slips and details of wires and canceled checks. Your bank will likely keep records for fewer years than what you, as a lawyer, are required to maintain by your State Bar.
Trust Account Receipts and Disbursements Journal
Essentially a record of your trust account, you want to keep track of every cent that comes and goes, including interest. This means that all activity for individual client trust account details shows up here. Keep the same information as you would for bank transactions: when the transaction occurred, the amount of money, who it’s coming from or going to, and why.
On top of keeping a full record of the money coming and going from your firm’s trust account, you also need to keep track of the sub-accounts for each client. This record puts all the transactions related to a matter in one place. Keep a record of the running balance of each client sub-account to show there haven’t been any overdrafts.
Trust Ledger Balance Report
This is your bird’s-eye-view of your client-matter finances. Also known as a trust listing, this is the list of all your client matters and their associated account balances. Maintaining this record lets you see which accounts are depleted and which have funds available, as well as last activity records so you know if a matter is closed.
Trust Account Monthly Reconciliation Report
This is what helps you keep your ducks in a row and catch any errors while they’re still easily fixable. Each month, law firms should reconcile their bank ledger with the balance in their account.
The firm also needs to reconcile individual client ledgers with the bank ledger and balance. Known as three-way reconciliation, this process is required by State Bar Associations.
Trust Account Record Retention Checklist
Firms should keep a written record of the records they keep. As a bonus, having this checklist ensures that these processes are attended to regularly, which can be especially helpful in firms with more than one lawyer.
Finally, know your jurisdiction’s requirements on how long you need to keep records on file.