What records do I need to keep for my law firm's trust account?
The California State Bar requires attorneys to maintain complete records of all client trust account activity. These records must be detailed enough to show exactly what funds you’re holding, who they belong to, and every transaction in and out. Missing or incomplete records can trigger disciplinary action even if no funds are actually missing.
Individual client ledger cards are the foundation. You need a separate record for each client showing their trust balance, every deposit, and every disbursement. This is what proves you’re not commingling funds between clients. When the State Bar asks how much you’re holding for a specific client, the ledger card is your answer.
Bank statements must be kept as received from your financial institution without alterations. Monthly originals showing all activity, cleared checks, and running balances. These serve as the independent verification of what actually happened in the account.
Trust account journals capture every transaction chronologically across all clients. This runs parallel to your individual client ledgers. Both should tell the same story from different perspectives. Discrepancies between the two indicate errors that need investigation.
Three-way reconciliation reports are required monthly. You reconcile your bank statement balance against the sum of all client ledgers and your trust account journal total. All three numbers must match. When they don’t, something is wrong and you need to find it before it becomes a compliance problem or worse.
Source documents provide proof of every transaction. Deposit slips, check images showing front and back, wire transfer confirmations, and any other documentation of money moving in or out. You need evidence not just that transactions happened but that they were properly authorized.
Client authorizations should be documented in writing, especially for disbursements and payment of your fees from trust. Your fee agreement should clearly spell out when and how you’ll withdraw earned fees from the trust account.
California requires you to keep all trust account records for at least five years after the matter ends. The State Bar conducts random compliance audits, and auditors expect organized records going back years. Firms that can’t produce complete documentation face serious consequences regardless of whether any funds are actually mishandled.
The practical challenge is staying current with this documentation. Many attorneys let reconciliations slide for months, then panic when the books don’t balance or an audit notice arrives. Monthly law firm trust accounting catches small errors before they become unexplainable gaps that raise red flags.
If you’re using practice management software like Clio, proper integration with your accounting system matters. The two should communicate so client payments post correctly and trust transfers to operating happen cleanly. Working with an LA County bookkeeper for small business who understands both systems can prevent the reconciliation headaches that come from disconnected software and inconsistent processes.
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