Under Rule 1.15 of the Illinois Rules of Professional Conduct, lawyers who come into possession of funds belonging to a client or third party in connection with representation must deposit the funds in a client trust account. Most lawyers in private practice need to have a trust account because they will handle client or third-party funds at some point in the course of their practice. Client and third-party funds that must be held in trust accounts include settlement proceeds, escrow funds, most retainer fees, funds advanced by clients to pay filing fees, and bond deposit refunds where a portion of the bond refund is owed to a client or a client’s relative. See the Client Trust Account Handbook for a detailed discussion of what funds must be maintained in a trust account. Lawyers who never handle client or third-party funds are not required to have trust accounts.

Generally, yes. Rule 1.15(d) of the Illinois Rules of Professional Conduct requires that funds received to secure payment of legal fees and expenses be deposited in a client trust account, to be withdrawn by the lawyer only as fees are earned and expenses incurred. Rule 1.5(d)(1)-(5) sets forth the common types of fee agreements and provides for some exceptions to the use of trust accounts for the deposit of fees, but those only apply to fixed fees, engagement retainers, and special purpose retainers.

“IOLTA” stands for Interest on Lawyer Trust Accounts. An IOLTA account is a pooled, interest-bearing demand deposit account used by lawyers to hold client funds. The interest earned on IOLTA accounts is remitted to the Lawyers Trust Fund (LTF), a charitable foundation designated as the recipient by the Illinois Supreme Court. Earned interest remitted to the LTF is used to fund civil legal aid organizations across Illinois. Under Rule 1.15B(a) of the Illinois Rules of Professional Conduct, Illinois lawyers are required to deposit funds belonging to a client or third person into an IOLTA account if the funds cannot earn net income for the client or third person. Net income means interest that exceeds the costs incurred to secure such interest.

Instructions for establishing an IOLTA account are available from the Lawyers Trust Fund, which administers the Illinois IOLTA program.

The answer depends on your reasonable judgment that the funds to be held in trust are capable of earning net interest for an individual client or third person. Typically, trust funds that are nominal in amount or are expected to be held for a short period of time, including advances for costs and expenses, will be deposited in an IOLTA trust account. If funds are capable of earning net interest, those funds should be deposited into a separate interest- or dividend-bearing non-IOLTA trust account with the client designated as the income beneficiary. Under no circumstances may the lawyer or law firm receive the interest generated on the account.

In determining whether funds should be deposited into an IOLTA or non-IOLTA client trust account, Rule 1.15B(b) of the Illinois Rules of Professional Conduct provides that a lawyer or law firm should “exercise reasonable judgment” taking into consideration such factors as:

1. (1) The amount of client or third-person funds to be deposited;


2. (2) The expected duration of the deposit, including the likelihood of delay in the matter for which the funds are held;


3. (3) The rate of interest at the financial institution where the funds are to be deposited;


4. (4) The cost of establishing and administering a non-IOLTA client trust account for the benefit of the client, including the cost of the lawyer's services, financial institution fees and service charges, and the cost of preparing tax reports;


5. (5) The capability of the financial institution, through sub-accounting, to calculate and pay interest earned by each client's funds, net of any transaction costs, to the individual client; and


6. (6) Any other circumstances that affect the ability of the client's funds to earn net interest for the client.

Rule 1.15B(b) further states: “A lawyer who exercises reasonable judgment in determining whether to deposit client or third-person funds into an IOLTA account or a non-IOLTA client trust account pursuant to this rule will not be subject to a charge of ethical impropriety or other breach of professional conduct on the basis of that determination.”

If funds are deposited into an IOLTA client trust account, Rule 1.15B(b) also requires that a lawyer must review the lawyer's IOLTA account(s) at reasonable intervals to determine whether changed circumstances require further action regarding the deposited client or third-person funds.

Rule 1.15B(a) of the Illinois Rules of Professional Conduct prohibits use of non-interest-bearing trust accounts. Trust funds can be held in only two types of accounts: (1) an IOLTA account, a pooled interest-bearing trust account established with an eligible financial institution with the Lawyers Trust Fund of Illinois designated as income beneficiary, for the deposit of nominal or short-term funds of clients or third persons; or (2) a separate, single-client, interest-bearing non-IOLTA trust account with the client designated as income beneficiary. A lawyer with a non-interest-bearing account should convert it to one of these two types of interest-bearing accounts.

There are more than 400 Illinois banks eligible to hold IOLTA deposits under Rule 1.15B(c) of the Illinois Rules of Professional Conduct. Unfortunately, not all bank employees are familiar with the operation of IOLTA accounts. Instructions for banks and notice of enrollment forms are available from the Lawyers Trust Fund (LTF), which administers the Illinois IOLTA program. If you have any questions or need forms faxed to you, please contact LTF Director of Banking Terri Smith Ashford via email or at 312-938-3001 or 800-624-8962.

Rule 1.15B(e) of the Illinois Rules of Professional Conduct requires Illinois lawyers to maintain client trust accounts only at banks that have agreed to notify the ARDC whenever a trust account is overdrawn or contains insufficient funds to pay an instrument presented against the account regardless of whether the instrument is honored. Click here for a list of banks that have agreed to make such notification to the ARDC.

When the ARDC receives an overdraft notification from a bank, a letter is sent to the lawyer requesting an explanation for the account shortage and supporting documentation. If evidence shows that the overdraft resulted from error or inadvertence and that client funds were not misused or misappropriated, the ARDC typically declines to pursue disciplinary charges, although the lawyer may be required to undertake some remedial action or to participate in an educational program if evidence shows that the lawyer’s practices relating to the handling of client funds or trust account record-keeping are not fully consistent with ethics rules. If evidence shows that the overdraft resulted from the lawyer’s use of client funds for the lawyer’s own business or personal purposes, formal disciplinary charges will usually result.

No. A lawyer cannot maintain the lawyer’s own funds in his or her client trust account as a “cushion” to prevent inadvertent overdrafts or to cover the lawyer’s writing trust checks on money not yet collected. This is commingling.

Under Rule 1.15(c) of the Illinois Rules of Professional Conduct, however, a lawyer may deposit the lawyer’s own money into the lawyer’s trust account to cover necessary and reasonable bank service charges, such as wire transfer fees. Accurate records must be kept regarding which part of the funds are the lawyers.

If you deposit funds from a source and are not sure that it will ultimately be collected, wait and confirm with your bank before writing a trust check. Also, know your bank’s funds availability policy to ascertain when deposited funds become available for withdrawal and when they are expected to clear. U.S. banking laws require that banks give customers access to their funds within one to five business days. (The timing depends on whether the check-issuing bank is foreign or domestic, local or out-of-state.) Bear in mind that even though funds represented by a deposited check may be available for withdrawal, the transaction can be reversed at a later date if the check was a forgery.

Rule 1.15A of the Illinois Rules of Professional Conduct provides lawyers with detailed guidance regarding records that must be prepared and maintained for client trust accounts. These include copies of accountings provided to clients and third parties, checkbook registers, check stubs, records of deposits and debits, bank statements, fee agreements and billing statements. Rule 1.15A(b)(1)-(8) also requires that lawyers prepare and maintain the following accounting records for client trust accounts including:

• a receipts journal identifying the date, source, and description of each item deposited;


• a disbursements journal identifying the date, payee and purpose of each disbursement;


• contemporaneous ledger records showing, for each separate trust client or beneficiary, the source of all funds deposited, the date of each deposit, the names of all persons for whom the funds are or were held, the amount of such funds, the dates, descriptions and amounts of charges or withdrawals, and the names of all persons to whom such funds were disbursed; and


• quarterly reconciliation reports, including reconciliations of ledger balances with client trust account balances.

See the Client Trust Account Handbook for a detailed discussion of the accounting records required under Rule 1.15A and for sample recordkeeping forms. The ARDC also offers online CLE programs covering trust account record-keeping requirements.

Rule 1.15A(a) of the Illinois Rules of Professional Conduct provides, in part: “Complete records of client trust account funds and other property must be kept by the lawyer and must be preserved for a period of seven years after termination of the representation.” This provision is consistent with Illinois Supreme Court Rule 769, which requires a lawyer to maintain all financial records relating to the lawyer’s practice for a period of not less than seven years.

Rule 1.15(b) of the Illinois Rules of Professional Conduct states: “[F]unds must be deposited in one or more separate and identifiable interest- or dividend-bearing client trust accounts maintained at an eligible financial institution in the state where the lawyer’s office is situated, or elsewhere with the informed consent of the client or third person.” When a lawyer participates in an IOLTA program in another state where the law office is situated, the lawyer’s ethical obligation is satisfied by compliance with the IOLTA rule of the state in which the office is situated. See also ILRPC Rule 8.5(b) (Choice of Law).

The Lawyers Trust Fund of Illinois states:

“The location of your IOLTA account is determined not by where you are licensed, but by the state where your office is situated, where you practice, and where your clients reside or do business, unless otherwise directed by your client.

For example, a Missouri lawyer whose sole office is in Missouri but who occasionally represents clients in Illinois need not establish an Illinois IOLTA account to handle client funds. However, the lawyer should handle client funds as required by the safekeeping of property rules in Missouri, including participation in that state’s IOLTA program as appropriate. In contrast, a lawyer or law firm with bona fide offices situated in both Florida and Illinois would require an IOLTA account in each state.”

Rule 1.15B(d) of the Illinois Rules of Professional Conduct provides:

A lawyer who learns of unidentified funds in an IOLTA account must make periodic efforts to identify and return the funds to the rightful owner. If after 12 months of the discovery of the unidentified funds the lawyer determines that ascertaining the ownership or securing the return of the funds will not succeed, the lawyer must remit the funds to the Lawyers Trust Fund of Illinois. No charge of ethical impropriety or other breach of professional conduct shall attend to a lawyer’s exercise of reasonable judgment under this paragraph.

Information about the procedure to remit unidentified funds to the Lawyers Trust Fund is available at: http://www.ltf.org/lawyers/unidentified-funds/.

If a known owner of trust funds cannot be found after reasonable steps have been taken to locate the person, and if the funds have remained unclaimed for five years, the funds may be remitted to the Illinois State Treasurer’s Office pursuant to the Revised Disposition of Unclaimed Property Act. 765 ILCS 1025/1 et. seq. See Comment [4] to Rule 1.15B. Information about the procedure to remit funds to the State Treasurer is available at: https://icash.illinoistreasurer.gov/.