Vol. 80, No. 12, December 2007
I am always confused about what records have to be maintained for my trust account. What are the requirements for recordkeeping of a trust account?
The requirements for a trust account are found in SCR 20:1.15. Although the Wisconsin Supreme Court has amended this particular rule a number of times in the past several years, the recordkeeping requirements for a lawyer trust account have remained the same as have existed under past versions of the rule.
Dean R. Dietrich, Marquette 1977, of Ruder Ware, Wausau, is chair of the State Bar Professional Ethics Committee.
Generally, a lawyer is obligated to maintain a series of ledgers and transaction reports regarding monies that are put into and taken out of the trust account. Lawyers also are required to maintain ledgers for each client showing the balance of funds in the trust account attributed to that client along with a monthly reconciliation of any transactions from the trust account related to that client.
Recordkeeping for Demand Accounts. Supreme Court Rule 20:1.15(f) is entitled "Recordkeeping Requirements for Trust Accounts." This section of the trust account rule provides that various records must be kept for a trust account used by the lawyer when the account is a demand account (meaning an account on which funds are disbursed through a properly payable instrument, SCR 20:1.15(a)(1)). For such accounts, a lawyer must maintain the following records:
- A transaction register that contains a chronological record of all account transactions including the date, source, and amount of all deposits; the date, check or transaction number, payee, and amount of all disbursements, whether by check, wire transfer, or other means; the date and amount of every other deposit or deduction of whatever nature; the identity of the client for whom funds were deposited or disbursed; and the balance in the account after each transaction;
- Individual client ledgers, which must be maintained for each client or matter for which the lawyer receives trust funds, and that include a record of each receipt and disbursement of funds and the balance following each transaction;
- A ledger for account fees and charges, for funds of the lawyer deposited in the trust account to accommodate monthly service charges, that shows each deposit and expenditure of the lawyer's funds in the account and the balance following each transaction used for service fees and charges;
- Deposit records (deposit slips) that show the amount of all deposits into the trust account with reference to the client or matter associated with the deposit and the date of the deposit;
- Disbursement records (canceled or imaged checks) that include information regarding all disbursements with the name of the client or the matter associated with the disbursement, the date of the disbursement, and the reason for the disbursement;
- Monthly statements that identify the name and address of the lawyer or law firm and the name of the account; and
- Reconciliation reports, which must be created in written format every 30 days, showing that the following balances are identical: 1) the transaction register balance; 2) the total of all subsidiary (client) ledger balances and the ledger for account fees and charges; and 3) the adjusted monthly statement balance, which is determined by adding all outstanding deposits and subtracting all outstanding checks and deductions from the monthly statement's ending balance.
Recordkeeping for Tangible Property and Bearer Securities. In the case of a trust account that involves tangible property or bearer securities, a lawyer is required to maintain a property ledger that identifies the property and indicates the date the property was received, the owner's name, the client or matter with which the property is associated, and the location of the property. When property or securities are disbursed, the lawyer must obtain from the person receiving the property a signed receipt that contains a description of the property and identifies the date of disposition.
Need Ethics Advice? As a State Bar member, you have access to informal guidance and help in resolving questions regarding Wisconsin's Rules of Professional Conduct for Attorneys. Ethics Hotline: To informally discuss an ethics question, contact the State Bar ethics counsel, Timothy Pierce. He can be reached at (608) 250-6168 or (800) 444-9404, ext. 6168, Monday through Friday, 9 a.m. to 4 p.m.
Requirements of Electronic and Print Records. Many lawyers today maintain their trust account records in electronic form using different types of business or checking account programs. Although a lawyer may maintain these records in electronic format, the lawyer must be able to reproduce the electronic information in a printed hard copy. Lawyers also must regularly back up an electronic record by using an appropriate storage method to ensure against loss of records. For lawyer trust accounts established under the Interest on Lawyer Trust Account program (IOLTA), the lawyer must print out the transaction ledger, the subsidiary ledger, and the reconciliation report every 30 days and retain those printed copies for at least six years under the requirements of the trust account rule (SCR 20:1.15(f)(4)b.).
Electronic banking is becoming far more prevalent in today's business world. However, the types of transfers that can be made electronically from a lawyer trust account are very limited. This is particularly true of the lawyer IOLTA account, which remits interest earned on the account to the Wisconsin Trust Account Foundation Inc. It is anticipated that the Office of Lawyer Regulation and the State Bar of Wisconsin will continue to review the trust account rule and recommend changes to the court as electronic banking becomes more commonplace among businesses in Wisconsin.