Wisconsin Lawyer: Ethics: Trust Account Recordkeeping Requirements:

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    Ethics: Trust Account Recordkeeping Requirements

    In a follow-up to the February Ethics column on permissible lawyer trust account transactions, this article lays out the types of records attorneys must create and maintain for their trust accounts.

    Dean R. Dietrich

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    Wisconsin LawyerWisconsin Lawyer
    Vol. 84, No. 3, March 2011

    Question

    I know that I have to keep a lot of individual banking records for my lawyer trust account. What specific types of records must I maintain?

    Answer

    Wisconsin’s trust account rule, SCR 20:1.15, places rigid requirements on lawyers to maintain proper banking records for deposits and withdrawals from lawyer trust accounts. The February 2011 Ethics column addressed what types of transactions are prohibited when seeking to deposit or withdraw monies from a lawyer trust account. Recordkeeping for deposits and withdrawals is crucial to ensuring proper compliance with the trust account rule.

    SCR 20:1.15(f)(1) summarizes the types of ledgers and registers that must be maintained for a lawyer trust account. This rule provides as follows:

    a. Transaction register. The transaction register shall contain a chronological record of all account transactions, and shall include all of the following:

    1. the date, source, and amount of all deposits;

    2. the date, check or transaction number, payee and amount of all disbursements, whether by check, wire transfer, or other means;

    3. the date and amount of every other deposit or deduction of whatever nature;

    4. the identity of the client for whom funds were deposited or disbursed; and

    5. the balance in the account after each transaction.

    Dean DietrichDean R. Dietrich, Marquette 1977, of Ruder Ware, Wausau, is chair of the State Bar Professional Ethics Committee.

    b. Individual client ledgers. A subsidiary ledger shall be maintained for each client or 3rd party for whom the lawyer receives trust funds that are deposited in an IOLTA account or any other pooled trust account. The lawyer shall record each receipt and disbursement of a client’s or 3rd party’s funds and the balance following each transaction. A lawyer shall not disburse funds from an IOLTA account or any pooled trust account that would create a negative balance with respect to any individual client or matter.

    c. Ledger for account fees and charges. A subsidiary ledger shall be maintained for funds of the lawyer deposited in the trust account to accommodate monthly service charges. Each deposit and expenditure of the lawyer’s funds in the account and the balance following each transaction shall be identified in the ledger.

    The rule also addresses what deposit records the lawyer must maintain for deposits into the lawyer trust account. SCR 20:1.15(f)(1)(d) provides as follows:

    d. Deposit records. Deposit slips shall identify the name of the lawyer or law firm, and the name of the account. The deposit slip shall identify the amount of each deposit item, the client or matter associated with each deposit item, and the date of the deposit. The lawyer shall maintain a copy or duplicate of each deposit slip. All deposits shall be made intact. No cash, or other form of disbursement, shall be deducted from a deposit. Deposits of wired funds shall be documented in the account’s monthly statement.

    The trust account rule also describes what records the lawyer must maintain when making a disbursement from a lawyer trust account. The rule requires the following:

    e. Disbursement records.

    1. Checks. Checks shall be pre-printed and pre-numbered. The name and address of the lawyer or law firm, and the name of the account shall be printed in the upper left corner of the check. Trust account checks shall include the words “Client Account,” or “Trust Account,” or words of similar import in the account name. Each check disbursed from the trust account shall identify the client matter and the reason for the disbursement on the memo line.

    2. Canceled checks. Canceled checks shall be obtained from the financial institution. Imaged checks may be substituted for canceled checks.

    3. Imaged checks. Imaged checks shall be acceptable if they provide both the front and reverse of the check and comply with the requirements of this paragraph. The information contained on the reverse side of the imaged checks shall include any endorsement signatures or stamps, account numbers, and transaction dates that appear on the original. Imaged checks shall be of sufficient size to be readable without magnification and as close as possible to the size of the original check.

    4.Wire transfers. Wire transfers shall be documented by a written withdrawal authorization or other documentation, such as a monthly statement of the account that indicates the date of the transfer, the payee, and the amount.

    Finally, the lawyer must create and maintain specific records, including monthly statements, and must prepare a reconciliation report on transactions within the trust account on at least a monthly basis. SCR 20:1.15(1)(f) and (g) address these requirements as follows:

    f. Monthly statement. The monthly statement provided to the lawyer or law firm by the financial institution shall identify the name and address of the lawyer or law firm and the name of the account.

    g. Reconciliation reports. For each trust account, the lawyer shall prepare and retain a printed reconciliation report on a regular and periodic basis not less frequently than every 30 days. Each reconciliation report shall show all of the following balances and verify that they are identical:

    1. the balance that appears in the transaction register as of the reporting date;

    2. the total of all subsidiary ledger balances for IOLTA accounts and other pooled trust accounts, determined by listing and totaling the balances in the individual client ledgers and the ledger for account fees and charges, as of the reporting date; and

    3. the adjusted balance, determined by adding outstanding deposits and other credits to the balance in the financial institution’s monthly statement and subtracting outstanding checks and other deductions from the balance in the monthly statement.

    Several computer programs are available to help lawyers generate and manage the records and documents required by the trust account rule, but it is still the lawyer’s responsibility to make sure that the proper reports and documentation are maintained on transactions to and from lawyer trust accounts. All lawyers should review their trust account recordkeeping on a regular basis to make sure they are complying with the trust account rule.




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