IOLTA trust accounting, explained like you have five minutes
Client money is not your money — until it is earned. That single sentence generates most of the trust-accounting rulebook, and most of the ways firms get in trouble.
The two-account model
Your operating account holds the firm’s money: earned fees, reimbursements, revenue. Your trust (IOLTA) account holds client money: unearned retainers, settlement funds, filing-fee advances. The two must never mix, and every client’s funds must be traceable within the trust account.
Where firms slip
The classic failures are mundane: a retainer deposited to operating because the deposit slip defaulted there; earned fees left in trust “to be safe” (also a violation); a disbursement recorded against the wrong matter. None of these are villainy — they are bookkeeping friction, and friction is a software problem.
What good software does
It routes each payment to the correct account at the moment of payment, not at month-end. It keeps a ledger per case — starting balance, incoming payments, payouts, running balance — so the trust account is always the sum of its matters. And it produces the Trust Ledger report your reconciliation (and your bar auditor) wants to see.
LawOffice.ai does all three natively, on payment rails built exclusively for law firms.