Industry · Law firm trust (IOLTA) accounting
IOLTA and client-trust books, reconciled three ways every month.
Client trust money is the part of a law firm’s books with the least margin for error. Funds in an IOLTA or client-trust account belong to clients, must never be commingled with operating cash, have to be tracked on a separate ledger for every client and matter, and must reconcile three ways: the trust bank balance, the trust book balance, and the sum of all individual client-ledger balances, in agreement. TechBrot maintains that trust ledger and performs the three-way reconciliation as a recordkeeping and bookkeeping service, reviewed by a Certified QuickBooks ProAdvisor. To be exact about the boundary: we never hold, control, sign on, deposit to, or disburse from the IOLTA or any client-trust account — the attorney controls the trust account and makes every disbursement and transfer decision. For the broader picture, see our law firm accounting hub. We do the records; your CPA files. Independent firm, not affiliated with Intuit Inc.
Law firm trust accounting — the bookkeeping behind an IOLTA or client-trust account — is the part of a firm’s books with the least margin for error. Trust money belongs to clients, so it stays segregated from operating cash, tracked on a per-client and per-matter ledger, and reconciled three ways so the trust bank balance, the trust book balance, and the sum of every client’s ledger all agree. Retainers stay unearned until the work is performed, and trust-to-operating transfers happen only as fees are earned. TechBrot maintains the trust ledger and runs the three-way reconciliation as a recordkeeping service — we never hold, control, sign on, deposit to, or disburse from the trust account; the attorney controls the account and makes every disbursement. Bar-rule compliance is the attorney’s professional responsibility; we support it with clean, reconciled records. The full trust-accounting summary is below.
Maintained by the Certified QuickBooks ProAdvisor team at TechBrot Inc., an independent firm — not affiliated with Intuit Inc. We maintain the trust ledger and reconciliation only; we never hold, control, or disburse client funds, the attorney controls the trust account, and bar-rule compliance is the attorney’s professional responsibility. We coordinate with your CPA or EA, who files. Not legal, ethics, or bar-compliance advice.
Trust accounting, in five questions.
What is law firm trust (IOLTA) accounting?
It is the bookkeeping for money a firm holds for clients — advance fees, retainers, settlements — in a client-trust or pooled IOLTA account. The money belongs to the client until earned, so it is kept separate from operating cash, tracked on a per-client ledger, and reconciled three ways. TechBrot maintains the ledger and reconciliation; the attorney controls the account.
What is three-way reconciliation?
It confirms three independently kept balances agree: the trust bank balance, the trust book balance, and the sum of every client’s individual trust ledger. When all three match, no client is overdrawn and no trust money has been commingled with the firm’s operating funds. Your state bar’s rule may set how often it must be done; we perform it as a recordkeeping step.
Do you hold or move money in the trust account?
No. We are a recordkeeping service. We never hold, control, sign on, deposit to, or disburse from the IOLTA or any client-trust account. The attorney controls the account and makes every disbursement and transfer decision; we maintain the ledger and reconciliation that record and verify it.
How are retainers and earned-vs-unearned fees handled?
Advance fees and retainers are booked as unearned liabilities held in trust, then recognized as income only as the work is performed and billed. A trust-to-operating transfer happens only as fees are earned — the firm authorizes and makes the transfer; we record and reconcile it so trust never funds operations early. We do not file income taxes; we coordinate with your CPA or EA.
Who is responsible for bar-rule compliance?
The attorney and the firm. Trust-account ethics rules (for example ABA Model Rule 1.15 and your state bar’s specific rules) are the attorney’s professional responsibility. We support compliance with clean, reconciled records but do not give legal or ethics advice or certify compliance — defer rule specifics to your state bar and your own counsel.
Trust accounting, plainly.
Trust accounting is the bookkeeping behind the money a law firm holds for its clients rather than money it has earned. When a client pays an advance fee or a settlement lands, those dollars go into a client-trust account — often a pooled IOLTA (Interest on Lawyers’ Trust Account) — and they stay the client’s property until the firm earns them. Because the money isn’t the firm’s, the rules are stricter than ordinary bookkeeping: it must never be commingled with operating cash, it must be tracked on a separate ledger for every client and matter, retainers stay unearned until the work is performed, and the whole account must reconcile three ways — the trust bank balance, the trust book balance, and the sum of all individual client-ledger balances, all in agreement. A trust error means a client’s money is out of place, which is why this work earns its own discipline. This page is the deep dive on trust and IOLTA; for firm-wide books — operating accounts, matter profitability, partner draws — see the law firm accounting hub.
TechBrot is a bookkeeping and advisory firm whose work is reviewed by a Certified QuickBooks ProAdvisor; it maintains that per-client trust ledger and performs the three-way reconciliation as a recordkeeping and bookkeeping service. The boundary is exact and we never blur it: we never hold, control, sign on, deposit to, or disburse from the IOLTA or any client-trust account. The attorney controls the trust account and makes every disbursement and transfer decision — we record what the firm authorizes and reconcile it so nothing is missed. Bar-rule and ethics compliance (for example ABA Model Rule 1.15 and the specific rules of your state bar) is the attorney’s professional responsibility; we support it with clean, reconciled records, but we do not provide legal or ethics advice or certify compliance. Defer all rule specifics to your state bar and the firm’s own counsel. We coordinate with your CPA or EA, who files. Independent ProAdvisor firm — not affiliated with Intuit Inc.
Three-way reconciliation, balance by balance.
The three trust balances, why a pooled IOLTA account needs a ledger for every client, how retainers and transfers are recorded, and where the bookkeeper’s role stops — set out in full below.
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The full explanation, section by section — the three balances, what a match proves, retainers and transfers, and who owns the rule.
What is three-way reconciliation?
Three-way reconciliation checks that three independently kept balances agree: the trust bank balance, the trust book balance, and the sum of every individual client’s trust ledger. When all three match, no client is overdrawn and no trust money has been commingled with the firm’s operating funds. TechBrot performs it every month as a recordkeeping step and flags any break for the attorney to resolve.
What is law firm trust (IOLTA) accounting?
Law firm trust accounting is the bookkeeping for money a firm holds for its clients rather than money it has earned: advance fees, retainers and settlements. Those dollars sit in a client-trust account, such as a pooled IOLTA, which stands for Interest on Lawyers' Trust Account. The money stays the client’s property until the firm earns it, and the attorney controls the account.
Trust accounting, plainly
Because the money isn’t the firm’s, the books around it are stricter than ordinary bookkeeping. Trust money is never commingled with operating cash. It is tracked on a separate ledger for every client and every matter. Retainers stay unearned until the work is performed. The whole account reconciles three ways, and the per-client ledger is the foundation every other trust control sits on.
The trust bank balance
The first balance is the trust bank balance: the reconciled balance of the client-trust or IOLTA account itself. It comes from the bank statement, adjusted for outstanding items. It is the actual cash on deposit, independent of anything in the books, which is why the bank and trust-account statements are the source every three-way reconciliation starts from.
The trust book balance
The second balance is the trust book balance: the trust-liability balance recorded in QuickBooks. It is what the firm’s own books say is being held for clients in total. Trust money is recorded as a liability, not as the firm’s income, because it is owed to clients. The book balance must equal the reconciled bank balance to the penny, and any difference between the two is a break to explain.
The sum of all client ledgers
The third balance is the sum of all client ledgers. Add up every individual client’s trust ledger balance, and that total must equal both the book balance and the bank balance. When all three agree, no client is overdrawn and no trust money is commingled. If any one of them diverges, TechBrot flags it for the attorney to resolve before the period closes.
One matter spends another’s funds
The third balance exists because a pooled account can hide a problem. Without a ledger for each client, a disbursement on one matter can quietly draw down another client’s trust money. The bank statement will never show it, because the pooled account still has a positive total. A live ledger for every client, reconciled to the bank and the books each month, makes a negative individual balance show up immediately.
Trust and operating money mixed
Commingling can run either way: client trust dollars sitting in the operating account, operating cash parked in trust to cover a shortfall, or one account doing both jobs. The recordkeeping answer is a strictly segregated trust account in QuickBooks and a reconciliation that proves no operating money is in trust and no trust money is in operating. TechBrot flags any crossover; keeping the accounts separate is the firm’s decision.
How are retainers and earned-vs-unearned fees handled?
Retainers and advance fees are booked as unearned liabilities held in trust, then recognized as income only as the work is performed and billed. A transfer from trust to operating follows earned, billed work, never ahead of it. The firm authorizes and makes each transfer; TechBrot records it and reconciles it against the earned fees. Whether a particular fee is earned is a legal judgment for the lawyer and their counsel, not a bookkeeping call.
Monthly three-way reconciliation
Monthly three-way reconciliation is the deliverable that ties it together. Every month, the trust bank balance, the trust book balance and the sum of all client ledgers are reconciled to agreement, with an aging so nothing sits stale. The work happens inside the firm’s own QuickBooks file, by a named Certified ProAdvisor. Setting up that trust structure in QuickBooks and the firm’s legal software is its own engagement.
What we do — and what we never do
TechBrot is a recordkeeping service, and the boundary does not move. TechBrot never holds or controls client funds, never signs on the trust account, never deposits to it or disburses from it, and never decides or initiates a transfer. The attorney controls the trust account and makes every deposit, disbursement and transfer decision. TechBrot maintains the per-client ledgers and performs the three-way reconciliation, so the records are clean, accurate and reconciled.
Which body answers which question
Trust-account rules belong to the state where the lawyer is licensed, set by its bar or high court. The American Bar Association’s Model Rule 1.15 is a model rule, not binding law. Which records to keep, for how long, and how often to reconcile are questions for your own state’s adopted rule. TechBrot gives no legal advice and certifies no compliance, so confirm any rule with your state bar or your own counsel.
Get trust books that reconcile three ways every month
A trust account that is already out of balance can be rebuilt as a recordkeeping engagement, back to a known-good baseline, and the firm-wide books and advisory sit on the law firm accounting hub. Every engagement is quoted as a fixed fee against a written scope. Book the discovery call to get trust books that reconcile three ways every month. Send this to whoever keeps your firm’s trust records, and subscribe for the rest of the series.
Three failures bar auditors find first.
These are three places trust books break — and any one of them is a problem if the account is ever examined. The reconciliation we maintain is built to surface all three before anyone else does.
Trust and operating money mixed.
Client trust dollars sitting in the operating account, operating cash parked in trust to cover a shortfall, or a single account doing both jobs — commingling is exactly what trust-account rules exist to prevent. The recordkeeping fix is a strictly segregated trust account in QuickBooks, a separate ledger per client and matter, and a reconciliation that proves no operating money is in trust and no trust money is in operating. We maintain those records and flag any crossover for the attorney; keeping the accounts themselves separate, and acting on any flag, is the firm’s decision — we don’t move money.
One matter spends another’s funds.
When per-client ledgers aren’t maintained, a disbursement on one matter can quietly draw down another client’s trust balance — an overdraft that the bank statement alone will never reveal because the pooled account still shows a positive total. The fix is a live ledger for every client whose sum is reconciled to the bank and the book balance each month, so a negative individual balance surfaces immediately. We surface it in the records; the attorney resolves how funds are corrected.
Unearned fees recognized too early.
Retainers and advance fees recorded as revenue the day they land — before the work is done — overstate income, hide an unearned-fee liability, and risk trust-to-operating transfers happening before fees are actually earned. The recordkeeping fix is retainers held as unearned liabilities in trust and recognized as income only as earned and billed, with each transfer to operating tied to billed, earned work. The transfer decision and timing are the firm’s; we record and reconcile against earned fees.
What three-way reconciliation actually checks.
Three-way reconciliation is the heart of trust accounting: three independently maintained balances must agree. When they do, no client is overdrawn and no trust money has touched operating cash. We perform this reconciliation as a recordkeeping step every month and flag any break for the attorney to resolve.
The trust bank balance
The reconciled balance of the client-trust or IOLTA account itself, taken from the bank statement and adjusted for outstanding items — the actual cash on deposit, independent of anything in the books.
The trust book balance
The trust-liability balance recorded in QuickBooks — what the firm’s books say is being held for clients in total. It must equal the reconciled bank balance to the penny.
The sum of all client ledgers
Add up every individual client’s trust ledger balance. That total must equal the book balance and the bank balance. When all three agree, no client is overdrawn and no trust money is commingled; if any one diverges, we flag it for the attorney to resolve before the period closes.
Trust recordkeeping, done by an expert.
Every engagement is scoped to your matters and the practice-management software you use, delivered in your own QuickBooks file by a named Certified ProAdvisor. We maintain the records and reconciliation; you control the trust account and every disbursement, and your CPA files.
Per-client & per-matter trust ledgers
A separate, live trust ledger for every client and matter, so each balance is provable on demand and a single matter can never quietly draw on another’s funds — the foundation every other trust control sits on.
Monthly three-way reconciliation
Trust bank balance, trust book balance, and the sum of all client ledgers reconciled to agreement every month, with an aging so nothing sits stale — performed as a recordkeeping step, with any break flagged for the attorney.
Retainers & earned-vs-unearned fees
Retainers and advance fees held as unearned liabilities in trust and recognized as income only as earned and billed — so revenue is real and trust-to-operating transfers track to fees actually earned.
Trust-to-operating transfer records
Clean, matched records of each transfer the firm authorizes from trust to operating as fees are earned — we record and reconcile what the attorney moves; we never initiate, sign, or make a transfer ourselves.
Trust-ledger cleanup & rebuild
Untangle commingled history, rebuild per-client ledgers from source records, resolve stale and unidentified balances, and reconcile the trust account back to a known-good, defensible baseline.
QuickBooks & legal-software setup
A law-firm trust structure in QuickBooks and your practice-management and payment tools — Clio, MyCase, LawPay and the rest — connected so trust activity reconciles cleanly into per-client ledgers.
What we do — and what we never do.
Trust accounting is the most boundary-sensitive work a bookkeeper can touch. We hold a single line and we hold it without exception. We are a recordkeeping service: we maintain the trust ledger and perform the three-way reconciliation. We do not, ever:
- Hold or control client funds. We never take custody of, or have control over, money in the IOLTA or any client-trust account.
- Sign on the trust account. We are never a signatory; we have no authority to authorize anything on the account.
- Deposit to the trust account. The firm receives and deposits client funds; we record the deposit, we do not make it.
- Disburse from the trust account. Every disbursement to a client, third party, or the firm is made by the attorney; we record and reconcile it.
- Decide or initiate transfers. Trust-to-operating transfers as fees are earned are the firm’s decision and the firm’s action; we never initiate one.
- Give legal or ethics advice, or certify compliance. We don’t interpret bar rules or certify that the firm is compliant.
What we do is maintain the per-client trust ledger and perform the three-way reconciliation as a recordkeeping service — producing the clean, reconciled records that let the attorney meet their professional obligations. The attorney controls the trust account and makes every disbursement and transfer decision. Bar-rule compliance (for example ABA Model Rule 1.15 and your state bar’s specific rules) is the attorney’s professional responsibility; for rule specifics, talk to us about the records and defer to your state bar and your own counsel.
Which body answers which question.
Trust-account rules are set by the jurisdiction where the lawyer is licensed, and they are not uniform. The ABA Model Rules are a model: they bind no one until a state adopts a version of them, and states differ on numbering, how often the account must be reconciled, how long records must be kept, and what happens when an account overdrafts. So this page does not tell you what your rule says. It tells you who does.
| The question | Who answers it | Where the authority lives |
|---|---|---|
| What my trust-account rule actually requires | The state bar or high court of every jurisdiction where the lawyer is licensed — not the ABA. | That state’s adopted rules of professional conduct. Each state adopts its own rule; the numbering and the text can differ from the model rule. |
| Which records I must keep, and for how long | The state bar’s recordkeeping provision. | The state’s trust-accounting rule. How long records must be kept, and when that period starts, is set by that rule. |
| How often the account must be reconciled | The state bar. | The adopted rule. Some jurisdictions state a frequency; others require only that records be current and accurate, which is a different obligation. |
| Whether a particular fee is earned or unearned | The lawyer, with their own counsel — and in many states a bar ethics hotline or advisory service. | State ethics opinions and the bar’s advisory guidance. This is a legal judgment about a specific fee agreement; it is not a bookkeeping determination and we do not make it. |
| Where IOLTA interest goes and how it is remitted | The state’s IOLTA program administrator, which may be a bar foundation rather than the bar itself. | The program’s own enrollment and remittance rules, which are separate from the conduct rules. |
| What happens if the trust account overdrafts | The bank, and then the bar. | Your state’s rule may require the bank to notify the bar of a trust-account overdraft, independently of anything the firm does. This is the reason a reconciliation that surfaces a shortfall early matters operationally, not just tidily. |
| Whether the firm is compliant | Nobody outside the firm can answer this. The obligation is the lawyer’s, and the bar is the body that examines it. | The bar’s own audit or random-examination program where one exists. No bookkeeper — including us — can certify compliance, and any who offers to is telling you something worth noticing. |
Why this page will not tell you your rule. A bookkeeping firm that tells a lawyer what a bar rule requires does two harmful things at once: it offers legal advice it is not authorized to give, and it invites reliance on a reading that the bar — not the bookkeeper — will ultimately judge. The division is clean and we keep it that way: we maintain the records and the three-way reconciliation; the rule belongs to the lawyer, their own counsel, and the bar. When a rule question comes up during an engagement, we say at the time that it is one, and route it to your state bar or your counsel rather than answering it. A firm licensed in more than one jurisdiction can be subject to more than one rule set at once, and how the records satisfy each one is a question for your own counsel.
Reconciled to how the trust account moves.
- QuickBooks Online — trust and operating books in one file, kept strictly separate
- Clio — matter management and trust ledgers reconciled to QuickBooks
- MyCase — trust activity and billing reconciled to QuickBooks
- PracticePanther — matter billing and retainer tracking
- CosmoLex — built-in trust accounting reconciled to QuickBooks
- LawPay — trust and operating card payments kept on separate rails, matched to ledgers
- Smokeball — practice management synced to the books
- Bank & trust-account statements — the source for the three-way reconciliation
On different software? If it tracks matters, billing, or trust activity and reports to a bank account, we can reconcile it into per-client trust ledgers. Ask on a discovery call.
Clean trust books are the floor, not the ceiling.
Sound trust accounting is non-negotiable — but it’s the floor, not the whole building. Once the trust ledger reconciles three ways every month and your operating books are matter-accurate, the question shifts from “are our records clean and defensible?” to “what do the numbers tell us to do?” Which practice areas actually carry the firm, where realization and collections are leaking, how partner compensation should be structured, when to hire. That broader, firm-wide view lives on our law firm accounting hub.
From there, law firm advisory turns clean books into decisions: a Certified ProAdvisor who knows your numbers translating them into profitability, compensation, and cash-flow judgment. Trust-account compliance always remains the firm and its attorneys’ professional responsibility; what we add on top is the analysis. Explore fractional CFO & advisory →
Maintained by the ProAdvisor team.
This page reflects how TechBrot actually handles client-trust and IOLTA recordkeeping. It is maintained by the Certified QuickBooks ProAdvisor team at TechBrot Inc., a Delaware-incorporated independent ProAdvisor firm, and reviewed for technical accuracy on per-client trust ledgers, three-way reconciliation, and earned-versus-unearned retainer handling. We maintain the trust ledger and the reconciliation only — we never hold, control, sign on, deposit to, or disburse from any client-trust account; the attorney controls the account and makes every disbursement. Bar-rule and ethics compliance (for example ABA Model Rule 1.15 and the specific rules of your state bar) is the attorney’s professional responsibility; we support it with clean records and do not provide legal or ethics advice or certify compliance. For trust-rule specifics, defer to your state bar and the firm’s own counsel.
Certifications
Active Intuit Certified QuickBooks ProAdvisor — Online (L2) and Payroll
Scope
Per-client trust ledgers, three-way reconciliation, earned-vs-unearned retainers, transfer records · recordkeeping only · income-tax filing coordinated with your CPA/EA
Boundaries
We never hold, control, sign on, deposit to, or disburse from any client-trust account; the attorney controls the account · no legal or ethics advice; bar-rule compliance is the attorney’s responsibility
Independence
Independent Certified QuickBooks ProAdvisor firm · Not affiliated with Intuit Inc.
IOLTA & trust accounting questions.
Does TechBrot hold, control, or disburse money in our trust account?
What is three-way trust reconciliation, exactly?
How do you handle retainers and earned-versus-unearned fees?
Who is responsible for bar-rule and ethics compliance?
Do trust-account rules differ from state to state?
Will you tell us whether something complies with our bar rule?
How is this different from your law firm accounting page?
Can you clean up a trust account that’s out of balance or commingled?
What does trust accounting cost?
Do you provide legal advice or interpret our state’s trust rules?
Ready when you are
Get trust books that reconcile three ways every month.
Book a 30-minute discovery call. A Certified ProAdvisor reviews your trust ledger, where reconciliation is breaking, and the right next step — with a written fixed-fee scope within 3 business days. No pitch. We maintain the trust ledger and reconciliation only; you control the trust account, and bar-rule compliance stays with you and your counsel. Your CPA files.