Texas attorneys must hold unearned fees, settlement funds, and any money that is not fully earned yet in a trust account, keep complete records for five years after the representation ends, and reconcile that account every single month. That is the short version. Here is what it actually looks like in practice, and where firms most often slip.
What Counts as Client Trust Money in Texas
Under
Texas Disciplinary Rule 1.15, trust funds include unearned fees and advance payments, settlement money, and any funds a client and the firm both have a claim to until that claim is resolved. Money that is fully earned, or belongs entirely to the firm, does not belong in the trust account at all. It should move to the operating account as soon as it is earned.
The mistake firms make most often here is leaving earned fees sitting in the trust account "to be safe." That is not safer. It is exactly the kind of
commingling a bar audit looks for.
Texas Recordkeeping Requirements
Rule 1.15(a) requires Texas attorneys to keep complete records of trust account funds and
preserve them for five years after the representation ends. That means:
- Checkbooks, canceled checks, and check registers.
- Bank statements and deposit slips.
- Client ledgers showing the date, amount, source, and explanation for every receipt and disbursement.
Five years is longer than most firms assume, and it applies from the end of the representation, not from when the account was opened. A firm that closes a case and clears out the file five months later, then gets a records request four years after that, still needs to be able to produce it.
Three-Way Reconciliation Expectations in Texas
The guidance from the State Bar of Texas practice management program is blunt about this: reconcile, reconcile, reconcile. Monthly, not quarterly, and not "when things feel off."
A proper reconciliation means three numbers agree at the end of every month:
- The bank statement balance.
- The check register balance.
- The sum of every individual client ledger.
If those three numbers do not match, something in the account needs to be found and fixed before the next month starts, not carried forward.
What Happens If a Texas Trust Account Comes Up Short
When the numbers do not tie out, the fix is almost always the same three-step search: look for a client ledger that was never created for a transaction that happened anyway, look for activity that never got posted to the register, and check for a plain math error in the reconciliation itself. Most shortages trace back to one of those three causes rather than anything more dramatic. If you are dealing with an actual overdraft notice right now,
how to respond to an IOLTA overdraft notice walks through the immediate steps.
Common Mistakes Texas Firms Make
- Leaving earned fees in the trust account. Move fees to operating as soon as they are earned, not at the end of the month.
- Letting client ledgers drift from the register. A ledger that is not updated the same week a transaction happens becomes a ledger nobody trusts by month end.
- Treating the five-year retention period as optional once a file closes. The clock does not stop when the case does.
- Reconciling the bank balance alone. A bank balance that matches the register means nothing if the client ledgers underneath it are wrong. All three numbers have to agree.
Getting Texas Trust Accounting Right, Every Month
None of this is complicated in theory. It is easy to fall behind on in practice, especially for a firm juggling caseloads and payroll and everything else that comes with running a practice. That is the specific gap
trust account bookkeeping for law firms is built to close: someone reviewing the reconciliation every month, catching the ledger that drifted before it becomes a real shortage, and keeping records in the shape a bar audit expects to see. If it is the rest of the firm's bookkeeping and financial systems that need the same kind of second look,
Rebel Patriot Business Services works with law firm owners on that broader picture too.
Frequently Asked Questions
How often do Texas law firms need to reconcile their IOLTA account?
Monthly. The State Bar of Texas practice management guidance calls for a three-way reconciliation every month, meaning the bank statement, the check register, and the total of all client ledgers agree. Quarterly is too slow to catch a problem before it grows.
How long do Texas attorneys have to keep trust account records?
Rule 1.15(a) calls for complete trust account records to be kept for five years after the representation ends. The clock starts when the matter closes, not when the account was opened.
Can earned fees stay in the trust account until the end of the month?
Earned fees should move to the operating account as soon as they are earned. That is the clean bookkeeping answer. Leaving them in trust is one of the most common ways commingling starts. Whether a specific situation raises an ethics issue is a question for the State Bar of Texas or your own ethics counsel.
Does Rescue My IOLTA work with Texas law firms?
Yes. We handle monthly trust account reconciliation, client ledger cleanup, and audit ready records
for law firms across the country, including Texas. We work inside the practice management software you already use.
Rescue My IOLTA provides bookkeeping and trust-account compliance support, not legal advice. For legal or ethics questions specific to your firm, consult your state bar or your own counsel.
Get Expert Support for Your Trust Accounting
Don't leave your IOLTA compliance to chance. Contact Rebel Patriot Business Services today for tailored solutions that ensure your trust accounts are managed with precision and care.
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