There is no fixed limit on how long a lawyer can hold your money in trust. Every state’s ethics rules require lawyers to deliver client funds “promptly” once you are entitled to them, but “promptly” is measured against the circumstances rather than a set number of days. For a straightforward settlement with no outside claims, disbursement typically happens within a few days to a few weeks after the check clears. When liens, disputes, or tax paperwork are in play, the wait can run several months, and Medicare liens routinely push things to the far end of that range.
What a Trust Account Is For
A lawyer’s trust account is a separate bank account that holds money belonging to you or a third party until the lawyer sorts out who gets paid. Under ABA Model Rule 1.15, which forms the basis for trust account rules in every state, client funds must be kept separate from the firm’s own money.1American Bar Association. Rule 1.15 Safekeeping Property Settlement proceeds, closing funds, and estate distributions all sit in trust briefly on their way to the people they belong to. Your money going into trust first is normal. The question is how long it should stay there.
What “Promptly” Means
Rule 1.15 requires prompt delivery once you are entitled to receive the funds, without defining “prompt” in days or weeks.1American Bar Association. Rule 1.15 Safekeeping Property The standard is unreasonable delay given the circumstances. A two-week hold while a large check clears is reasonable. A six-month wait for Medicare to finalize a lien is frustrating but reasonable. A lawyer sitting on cleared funds with no pending claims and no explanation is not.
You also have the right to ask, at any time, for a full accounting of what is in your trust account, and your lawyer must provide it promptly.1American Bar Association. Rule 1.15 Safekeeping Property That right is the practical tool for finding out whether a delay has a legitimate cause.
Legitimate Reasons Your Funds Are Still in Trust
The Check Has to Clear First
Your lawyer cannot pay anyone before the settlement check fully clears the bank. Disbursing early exposes the firm to liability if the check bounces. Ordinary clearing takes about five to seven business days, but banks can hold larger deposits longer. Under federal Regulation CC, the portion of any single day’s deposits exceeding $6,725 can be held under the large-deposit exception, and the excess amount can sit for up to eleven business days from the date of deposit.2eCFR. 12 CFR Part 229 – Availability of Funds and Collection of Checks (Regulation CC) Most personal injury settlements clear that threshold easily, so two weeks of bank processing alone is common.
Liens Have to Be Identified and Paid
Before releasing funds, your lawyer has to identify and resolve outstanding claims against your settlement. Medical providers, health insurers with subrogation rights, Medicaid, and child support agencies can all hold valid liens that must be satisfied out of the proceeds. If a lawyer distributes money without addressing a valid lien, the lienholder can come after the lawyer personally, so this step is not one they can skip to move things along.
Medicare Liens Take the Longest
Medicare liens are the single biggest source of long delays in personal injury settlements. The process runs through the Benefits Coordination and Recovery Contractor, which takes up to 65 days to issue a conditional payment letter, followed by another 45 days if you dispute any of the charges listed.3Centers for Medicare and Medicaid Services. Medicare’s Recovery Process Only after that does Medicare issue a final demand letter showing what it is actually owed. The full cycle can easily run three to six months after settlement. Interest starts accruing from the date of the demand letter, and unresolved debts get referred to the U.S. Treasury after about 150 days, so your lawyer has strong reasons to work through this carefully. The portion of your funds potentially subject to the lien has to stay in trust until the number is final.
Case Costs and Fee Math
Case-related costs come off the top before your net share is calculated. Expert witness fees, filing costs, deposition transcripts, and similar expenses all get deducted per your fee agreement. If a vendor’s final invoice hasn’t arrived, your lawyer may need to wait for it to close out the numbers. This usually adds days, not weeks.
Disputes Over the Split
Sometimes there is genuine disagreement about how the money should be divided, whether over the amount a provider claims or over shares among multiple plaintiffs. When that happens, the ethics rules require the lawyer to hold the contested portion in trust until the dispute is resolved.1American Bar Association. Rule 1.15 Safekeeping Property
Tax Paperwork
Settlement payments generally trigger Form 1099 reporting, and when attorney’s fees are part of the deal, separate information returns must go to both you and your lawyer.4Internal Revenue Service. Tax Implications of Settlements and Judgments Your lawyer needs the settlement agreement to properly characterize the payments so the right forms issue, because different categories of damages get different tax treatment. Physical injury compensation is generally tax-free; emotional distress and punitive damages are taxable. Sorting this out can add time.
The Undisputed Portion Should Not Wait
This is the part most clients don’t realize: when only part of the money is contested, your lawyer must promptly release everything that isn’t in dispute.1American Bar Association. Rule 1.15 Safekeeping Property If your settlement is $100,000 and the only holdup is a $10,000 lien negotiation, you should receive the $90,000 that nobody is arguing over. Only the disputed portion stays frozen. If your lawyer is holding the entire settlement because one lien is still pending, that’s a legitimate reason to push back and ask why.
When the Delay Has No Good Explanation
Ask for a Written Accounting
Start by requesting, in writing, a detailed accounting of your trust funds and a specific timeline for disbursement. You are entitled to a disbursement sheet showing the total settlement, every deduction (attorney fees, case costs, lien payments), and your net recovery.5American Bar Association. Model Rule on Financial Recordkeeping – Preface If your lawyer can point to a specific reason for the delay, such as a pending Medicare demand letter or an unresolved lien, you at least know where things stand. If they can’t explain, that’s a warning sign.
File a Bar Complaint
If your lawyer ignores your requests or the delay has no legitimate basis, you can file a disciplinary complaint with the attorney disciplinary authority in the state where your lawyer is licensed, typically the state bar or a court-appointed disciplinary board. Describe the situation in writing, attach your fee agreement and relevant correspondence, and explain what you’ve already asked for. Trust account violations are among the most heavily punished offenses in legal ethics, with consequences ranging from suspension to disbarment, and intentional misappropriation often brings criminal charges as well.
Consider a Civil Claim
A bar complaint deals with the lawyer’s license; it does not directly get your money back. If funds have been wrongfully withheld, you may have grounds for a civil lawsuit for conversion or breach of fiduciary duty. A conversion claim usually turns on a formal demand: once you demand the money in writing and the lawyer refuses to return it without legal justification, possession that was lawful becomes wrongful. A malpractice claim may also be available if the delay caused you concrete financial harm, such as interest charges on debts the settlement would have paid off.