A Guide to Lawyer Trust vs Operating Accounts

A Guide to Lawyer Trust vs Operating Accounts

As a law practice, it’s important to follow rules for how to handle a client’s money. This means keeping funds separate through different lawyer trust accounts and operating accounts.

Using multiple accounts to manage these finances can be tricky.

It’s essential to have strict financial management practices and payment software that can handle multiple lawyer trust and operating accounts.

What is a Lawyer Trust Account

Lawyer trust accounts are the bank accounts lawyers use to hold client money during the attorney-client relationship.

These accounts hold retainer funds paid to the attorney or other money belonging to a client. The funds can not be used by the attorney’s office and must be responsibly handled.

Handling client money appropriately is required by American Bar Association Model Rules of Conduct. It’s also an essential part of maintaining a good client relationship. But it can make accounting and reconciliation difficult.


IOLTA stands for Interest on Lawyers’ Trust Accounts. It is the program laid out in the ABA rules (and implemented by each state bar) that tells lawyers the right way to accrue interest and handle client funds. The interest from these accounts is intended for things like civil and legal aid.

What is an IOLTA account?

According to the American Bar Association, it is a bank account that lawyers are required to open and use in the United States after changes to federal banking laws were passed by Congress in 1980. This change allowed some checking accounts to bear interest.

IOLTA or Interest on Lawyers’ Trust Accounts is a way to raise money for charitable purposes, mainly for programs that provide civil legal services for lower income people.

Operating Account Meaning

Operating accounts are the bank accounts where earned revenue and any other receivables for your law practice should be held.

So, after an attorney is paid for their services, that money would be moved out of a trust account and placed in an operating account.

Operating accounts are used to pay for business operation expenses within your law office. This is typically the account used to pay employees or make monthly payments – like payment processing fees – to vendors.

Income and Expenses for Businesses

Operating Account vs Lawyer Trust Account

According to these ABA rules, attorneys must follow guidelines not only regarding the use of interest-earning accounts, but for accounting practices too.

Because attorney trust accounts (for client funds) and operating accounts (for firm-owned receivables) serve different purposes, law offices need to:

  • Track all money that comes in to the firm
  • Strictly document where funds are being held
  • Ensure operating expenses are ONLY paid from an operating account
  • Properly handle and disburse the interest earned from trust accounts

Using the right payment software can have a huge impact on how hard trust account rules are to follow. ACH and credit card payments help create a digital record, so it’s easier to know when payments are made, and by whom.

Your payment processing software should also allow your law firm to use multiple bank accounts. You should be able to control which ones receive funds from clients and which ones are used to pay processing costs.

Trust Account Reconciliation

Digital payments are convenient, common, and expected – even when paying for legal services. Clients don’t want to have to pay by writing a check. They want eCheck and credit card payment options and simple payment channels, so they can pay for services quickly and easily.

Offering these services improves your reputation and relationships with clients. It’s also an easy way to simplify lawyer trust reconciliation.

PDCflow Trust and Operating Account Management

PDCflow offers secure payment options that help attorneys maintain compliance with fund management rules.

With the ability to set up multiple accounts, law offices can keep client funds safe. This makes it easier to reconcile and keep records in accordance with ABA client protection rules.

PDCflow also offers:

  • Multiple payment types - ACH and credit card payments, cash tracking
  • Multiple payment channels - online portal, email and text requests, cashier-assisted payments, QR codes
  • Digital contract signatures - send a contract via email or text, clients can digitally sign
  • Signatures and payments together - request an esignature on a contract and take a retainer payment at the same time

Do you want to learn more about PDCflow’s payment, document, and signature software? Request a demo with a Payment Expert today.

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Hannah Huerta - PDCflow Marketing Specialist
Hannah Huerta, Marketing Specialist

Hannah Huerta is a Marketing Specialist at PDCflow. She creates content for the accounts receivable and payment industry.

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