Beyond the Bar Exam: The High Stakes of IOLTA Accounting for Florida Attorneys

You graduated from law school. You passed the Florida Bar. You hung your shingle, perhaps in the competitive heart of Miami, ready to practice law. You are an expert in your field. You are almost certainly not an expert in the specialized, high-stakes world of fiduciary accounting.

Yet, if you handle client funds, The Florida Bar requires you to be one.

For solo practitioners and small law firms, managing an IOLTA (Interest on Lawyers' Trust Accounts) is often a source of quiet, persistent anxiety. The rules are complex. The stakes are non-negotiable. A simple data entry error, a moment of distraction, or a misunderstanding of the bank's "available balance" can quickly spiral into a career-threatening ethical violation.

The fear is justified. The Florida Bar is legendarily strict in its enforcement of trust accounting rules. This is not about "bad" lawyers stealing money. It is about protecting the public from any mismanagement of funds, whether the intent is malicious or not. A small, honest mistake can lead to a Bar grievance, a costly audit, suspension, or even disbarment.

The core of the issue is a simple, absolute concept: It is not your money.

What Exactly is an IOLTA Account?

An IOLTA account is a specific type of trust account. It is designed to hold client funds that are nominal in amount or held for a short period. This includes unearned retainers, settlement proceeds, or funds for real estate closings.

The "interest" part of the name is key. The account is interest-bearing. That interest does not go to the client, nor does it go to the attorney. It is automatically swept and remitted to The Florida Bar Foundation, which uses the funds to support legal aid organizations across the state.

This structure means your IOLTA account is a fiduciary responsibility in three directions. You have a duty to your client to safeguard their principal. You have a duty to the bank to maintain the account. And you have a duty to the Bar Foundation to ensure the interest is properly generated and remitted.

It is not an operating account. It is not a savings account. It is a temporary holding cell for other people's money, and you are the warden.

The Anatomy of a Simple, Devastating Mistake

How does a good attorney get into trouble? It rarely happens all at once. It happens through small, seemingly innocent errors that cascade.

Consider this scenario:

A new client retains your firm and gives you a $5,000 retainer. You correctly deposit this into your IOLTA account. The client's individual ledger now shows a balance of $5,000.

Over the next month, you perform 10 hours of work at $400 per hour. You have now earned $4,000 of that retainer. You prepare an invoice, send it to the client, and transfer $4,000 from the IOLTA account to your firm's operating account.

So far, so good.

But a week later, you need to pay a $150 court filing fee for that same client. You are busy. You pay it directly from your operating account, intending to "sort it out later." You have just made a critical error. You effectively paid a client expense with your own money. The proper procedure was to pay it from the IOLTA, as the client still had $1,000 in trust.

Now, your books are a mess. The client's IOLTA ledger thinks they have $1,000. Your operating account is short $150. If you try to "fix" this by transferring $150 from the IOLTA to your operating account without a corresponding invoice, you have just improperly taken client funds.

Now multiply this by 20 clients. Add a bounced check, a bank fee, and a wire transfer. The hole deepens.

This is how commingling and conversion begin. Not with a sinister plot, but with a busy attorney trying to manage a system they do not fully understand.

The Cardinal Sins of IOLTA Management

The Florida Bar (specifically Chapter 5 of the Rules Regulating The Florida Bar) is very clear about your responsibilities. While the full text is dense, the violations that auditors look for are straightforward. Avoiding them is the cornerstone of compliance.

1. Commingling Funds This is the most fundamental error. It is mixing client funds with your own. This can happen accidentally in several ways. The most common is leaving earned fees in the IOLTA account for too long. Once you have invoiced a client and are entitled to that money, you must promptly move it to your operating account. Leaving it in the IOLTA means your personal firm money is now commingled with other clients' trust funds. Another common error is depositing personal funds into the IOLTA "just to cover" anticipated bank fees, which is a significant violation.
2. Failure to Maintain Proper Records You cannot just rely on your bank's online portal. The Bar requires you to maintain a separate, detailed record for every client whose money you hold. This is the individual client ledger. This ledger must show every dollar received for that client and every dollar disbursed, resulting in a running balance. You must also maintain a general IOLTA journal showing all activity in chronological order.
3. Failure to Perform the Monthly Three-Way Reconciliation This is the single most important process you can perform to protect your license. A simple bank reconciliation (matching your checkbook to the bank statement) is not enough.A three-way reconciliation proves that three separate numbers match exactly at the end of every month:
   • The IOLTA Bank Statement Balance (adjusted for outstanding checks).
   • The IOLTA General Ledger (or checkbook register).
   • The sum total of all individual Client Ledger Balances.
   If these three numbers do not match, you have a problem. You may have made a data entry error. Or, far worse, you may have a negative balance for one client. This would mean you have inadvertently spent one client's money to cover the expenses of another. This is conversion, and it is a disbarment-level offense.
4. Disbursing Funds Before Final Clearance A check deposit may show as "available" in your bank account, but it has not cleared. Final, irrevocable settlement can take days or even weeks for out-of-state checks. If you disburse settlement funds to your client (or take your fee) before that deposit has truly cleared, you are taking a massive risk. If the check bounces, your IOLTA account will be short. You will have spent other clients' money to cover the shortfall. You, the attorney, are personally liable for that amount.
5. Paying Bank Fees from the IOLTA You cannot use client funds to pay for any bank service fees. This includes monthly maintenance fees, wire transfer fees, or the cost of ordering checks. These are overhead costs of your business. They must be paid from your firm's operating account. Many Florida-approved IOLTA banks are structured to automatically pull these fees from a linked operating account, but it is your responsibility to ensure this is set up correctly.

General Bookkeeping Software Is Not a Solution

Many solo attorneys believe their standard subscription to QuickBooks or another general accounting software is sufficient. This is a dangerous assumption.

These programs are designed to track business profit and loss. They are not designed, out of the box, for the unique demands of fiduciary accounting. Trust accounting is liability accounting. The money in your IOLTA is not an asset. It is a liability you owe to your clients.

It is possible to configure these programs to manage trust accounting, but it is not intuitive. It requires a specific chart of accounts, proper use of "customer" fields to mirror client ledgers, and a manual reconciliation process that the software does not inherently promote. A bookkeeper who is not specifically trained in legal trust accounting will almost certainly get this wrong. They will reconcile the bank account, but they will fail to perform the critical three-way reconciliation against the client ledgers.

From Anxiety to Assurance

Your job is to be a zealous advocate for your clients. It is not to be a part-time fiduciary accountant, constantly looking over your shoulder for a Bar auditor. The solution is not to live in fear, but to build an unbreachable wall of process and procedure.

First, create a written internal policy for all trust account transactions. Who has authority to make transfers? When are earned fees moved? How are deposits recorded?

Second, embrace the non-negotiable nature of the monthly three-way reconciliation. It is not an end-of-year task. It is a monthly requirement. This single report is your proof of compliance. It is your shield. If you are audited, it is the first thing a Bar auditor will ask to see.

Finally, recognize the limits of your own expertise. Practicing law is a demanding, full-time job. Managing high-risk fiduciary accounts is also a demanding, specialized job. For many small firms, this task is the perfect candidate for delegation. Not to a generalist bookkeeper, but to a professional service that understands the specific rules of The Florida Bar.

Your license is your most valuable asset. Protecting it with robust, accurate, and compliant bookkeeping is not an expense. It is an investment in your future.