Trust Account Charges
Background on Lawyer Trust Accounts
In existence since 1984, Arizona's Lawyer Trust Account program is based on Arizona Supreme Court Rule 43. The rule requires all lawyers receiving client funds in Arizona, or in connection with representation of clients in Arizona, to maintain an interest-bearing trust account to pool client funds when the funds cannot otherwise earn enough interest income for the client to justify securing a separate account. Interest from Lawyer Trust Accounts in most instances are donated to the Arizona Foundation for legal services and education to benefit programs of the Arizona Foundation for Legal Services and Education, which fund legal services for the poor and law related education for Arizona's school children. Learn more.
For additional information, email IOLTA@staff.azbar.org.
Rules Governing Lawyer Trust Accounts
There are specific rules to properly maintain the proper use and all maintenance of a lawyer trust account. The rules regarding lawyer trust accounts are located in Rule 43 and Rule 42 ER 1.15. Even if you never intend to handle cases that will require you to hold money or other properties for clients, it's imperative that you understand these obligations. The purpose of a lawyer trust account is to properly maintain the lawyer funds from the client funds.
Top 5 Trust Account Violations
1. Mistaken disbursement from the lawyer trust account.
Tip: Always make sure you are disbursing from the correct account number when transacting personal or business activity. A lawyer may have multiple accounts at a bank and to avoid disbursing from the wrong account, always double check.
2. Disbursing against uncollected deposits.
Tip: Wait at least 10 business days before attempting a disbursement on any deposit. Third party bank employees often implement or extend holds on deposits for arbitrary reasons. Writing checks before funds are available can result in an insufficient funds incident.
3. Inaccurate or incomplete trust account records.
Tip: Review the Arizona trust account manual and familiarize yourself with the minimum details required for each category of records required to be maintained. For example, many firms rely on the check images included on the monthly bank statements. These, however, often lack copies of the back of the cancelled check showing endorsement or are too small to be legible. Likewise, duplicate deposit records often lack the name of the client on whose behalf funds are being deposited.
4. Reconciliation errors.
Tip: Verify that your reconciliation reports reconcile the total of all individual ledgers (i.e. client and administrative), the general ledger balance, and the bank statement balance adjusted for outstanding transactions. If the calculated totals do not match or if one of the three categories is missing, your reconciliation is not a proper three-way reconciliation.
5. Failure to maintain an administrative ledger.
Tip: Transactions and funds unrelated to a client representation such as personal deposits to open an account, bank fees, or erroneous transactions, must be recorded on an administrative ledger. Deficits cause by unexpected bank fees must be immediately recorded and offset by way of personal funds to protect client and third-party funds.
Additional information
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