Record Requirements

Trust accounts require lawyers to adhere to specific financial record keeping for the proper practice of law. Unfortunately, many lawyers do not know these requirements. Yet, given the dire consequences a lawyer may suffer for failing to follow IOLTA account ethics rules, and given the financial institution reporting mandated by R.C. 4705.10, all lawyers who maintain client funds must strive to enhance their knowledge of IOLTA account requirements.

The lawyer discipline system enforces the standard of safekeeping of client property as a fundamental, fiduciary obligation of lawyers. Rule 1.15(a) requires that client and third-person funds are maintained (1) in an insured, interest-bearing account; (2) in a financial institution permitted under Ohio law and in the state where the lawyer’s office is situated; and (3) in an account designated as “client trust account,” “IOLTA account,” or with another identifiable fiduciary title.1 Rule 1.15 requires the lawyer to maintain the following financial records for a period of seven years:

  • Any fee agreements
  • A record for each client’s funds, setting forth:
    • the client’s name
    • the date, amount, and source of received funds
    • the date, amount, payee, and disbursement’s purpose
    • the current balance
  • A record of each bank account that sets forth:
    • the name of the account
    • the date, amount, and client for each credit and debit
    • the balance in the account
  • Any bank statements, deposit slips, and canceled checks provided by the bank, for each account
  • A monthly reconciliation of the client ledger and bank account records2

IOLTA account rules authorize lawyers to deposit their own funds into the trust account for the sole purpose of paying or obtaining a waiver of bank service charges,3 to place advances on expenses into the trust account,4 and to comply with R.C. 120.52, 3953.231, 4705.09, and 4705.10 and Gov. Bar R. VI, (1) (F). 5

Overdraft Notification

A dishonored check drawn from an IOLTA client trust account can signal (a) that the lawyer or the bank made an honest administrative, or accounting error, or (b) that the account is “out of trust,” and the lawyer is intentionally or unintentionally using the client funds. R.C. 4705.10 requires that any bank which holds attorney trust accounts notify Disciplinary Counsel of any dishonored checks written on an IOLTA account.6

While bank error or poor record keeping by the lawyer may be explanations for an overdraft on the IOLTA account, the far more serious concern is commingling of lawyer and client funds. If the overdraft was caused by a banking error, in responding to the Disciplinary Counsel’s investigation, the lawyer should immediately provide evidence of the bank’s mistake. If the overdraft is caused by the lawyer's accounting mistakes, the lawyer must assure the Disciplinary Counsel that the lawyer understands the mistakes, that they are isolated and will not be repeated. If the problem is more serious, involving commingling and misuse of the trust account by the lawyer, the investigation may involve the lawyer and the lawyer’s bank providing additional bank records to determine if client funds were impacted and if formal disciplinary action is warranted.

The lawyer should determine whether he or she can benefit from the assistance of counsel so that formal disciplinary action can be avoided if possible.