To open a client trust account, decide whether you need an IOLTA account, a non-IOLTA account, or both; choose a bank from your state’s approved list; bring your firm’s EIN, your bar license information, and the state’s enrollment form to a business banker; open the account under a title that identifies it as a fiduciary account; and then separately notify your state bar that the account exists. The whole setup is usually an afternoon of work, but every step has disciplinary stakes under Rule 1.15 of the ABA Model Rules of Professional Conduct, which requires complete separation of client money from your operating funds.
Decide Whether You Need IOLTA, Non-IOLTA, or Both
The account type depends on the funds you expect to hold, so settle this before you contact a bank.
An IOLTA account (Interest on Lawyer Trust Account) is a pooled account for client funds that are too small or held too briefly to earn meaningful interest for any individual client. Interest on the pooled balance goes to the state’s bar foundation, which typically uses it to fund legal aid. Most client money lands here: routine retainers, settlement proceeds awaiting disbursement, and advance cost deposits.
A non-IOLTA trust account is a separate, interest-bearing account you open for a specific client when the deposit is large enough and will be held long enough that the client would earn more in interest than the account costs to maintain. Interest on a non-IOLTA account belongs to that client, and tax reporting follows.
To decide where a given deposit belongs, weigh the amount, how long you expect to hold it, current interest rates, and the administrative cost of opening and maintaining a separate account (including preparing tax reporting for the client). If projected interest to the client won’t exceed those costs, the money belongs in IOLTA. When in doubt, most state bars default you to IOLTA. You can open non-IOLTA accounts later for specific matters as they come up, so a new practice almost always starts with a single IOLTA.
Choose a State-Approved Bank
You cannot open a client trust account at any bank you like. Under the ABA Model Rules, trust accounts must be maintained at financial institutions approved by the state’s highest court or disciplinary agency.1American Bar Association. Model Rules for Trust Account Overdraft Notification – Rule 1 Every state bar publishes a list. Start there.
Two things make a bank “approved.” It has signed an agreement to report any overdraft or dishonored check on a trust account directly to the state’s disciplinary authority, and, for IOLTA accounts, it pays interest rates comparable to those on similar non-IOLTA business accounts. Many state programs set a benchmark rate tied to a percentage of the federal funds target rate, so you shouldn’t be earning negligible interest on a pooled IOLTA balance.
Approved banks also understand the operational details that general business bankers often miss, such as waiving service charges against IOLTA principal or against interest designated for the bar foundation. Using an unapproved institution is a disciplinary violation on its own, even if every client dollar is handled correctly. Check the list before you make an appointment.
Gather Your Documentation
Assemble the paperwork before you go in:
- Employer Identification Number (EIN): The account is opened under your firm’s existing EIN. Solo practitioners without one can apply online through the IRS and receive it immediately; you don’t need a separate EIN for the trust account itself.2Internal Revenue Service. Instructions for Form SS-4
- Professional license verification: Your current state bar card or license number, which the bank uses to confirm you’re authorized to handle client funds.
- State bar enrollment form: Most bars provide a “Notice to Financial Institution” or “Account Enrollment” form on their website. It tells the bank how to designate the account and, for IOLTA, where to remit the interest.
The enrollment form asks you to designate the account as IOLTA or non-IOLTA. For IOLTA, it carries the bar foundation’s identifying details so the bank knows where to send interest. For non-IOLTA, you’ll provide identifying details for the specific client whose funds will sit in the account. Check that the firm name on the forms matches your professional license exactly. Mismatches create processing delays.
A Note on Tax Reporting
For IOLTA accounts, the bank reports interest to the bar foundation and the foundation handles tax reporting; you generally have no 1099 obligation because the money never belongs to you or your client. For non-IOLTA accounts, the interest belongs to the client, and if it exceeds $10 in a year a Form 1099-INT must be filed.3Internal Revenue Service. Instructions for Forms 1099-INT and 1099-OID The bank typically issues it, but confirm this when you open the account and make sure the client’s taxpayer identification number is on file.
Open the Account at the Bank
Schedule an in-person meeting with a business banker. Going in person is worth the trip: you can hand over the enrollment form directly and confirm the banker understands the overdraft reporting obligation and, if applicable, the IOLTA interest remittance. Phone and online openings tend to miss these details.
In the meeting, the banker verifies your EIN and bar credentials, enters the account into the bank’s system, and sets the proper account designation. Expect to make a small initial deposit; minimum opening deposits for business trust accounts at most institutions fall between $25 and $100, though some banks require more.
The account title must clearly identify the account as a trust or fiduciary account. Examples: “Smith Law Firm IOLTA Account” or “Jane Smith, Attorney, Client Trust Account.” Before you leave, get copies of the signature cards and the account agreement, in paper or digital form. These confirm the account is active, properly titled, and ready to receive client funds.
The Only Firm Money That Belongs in Trust
Banks charge service and maintenance fees on trust accounts like any other business account. You are allowed to deposit a small amount of your own money to cover anticipated bank fees, but only enough for those charges and clearly tracked in your records. This is not permission to keep a cushion of personal funds in the account. Any firm money beyond what is reasonably needed for service charges is commingling, which is a disciplinary violation even when every client dollar is accounted for.
Notify Your State Bar
Opening the account at the bank does not complete the process. You must separately notify your state bar or bar foundation that the account exists. This usually means submitting a “Notice of Enrollment” or “Account Verification” form, often the same form the bank signed or stamped during setup.
Most jurisdictions accept this notification through an online portal tied to your licensing profile; some still require certified mail. After filing, check your licensing profile to confirm the trust account appears on your official record. If it doesn’t show up within a few weeks, follow up. A regulatory body that doesn’t have your trust account on file is a problem that gets worse the longer it sits.
Keep a copy of the submission confirmation with a date stamp. This receipt protects you during audits or if the bar later claims it never received notification. Failure to complete this notification step can result in administrative fines, and in some jurisdictions the regulatory board can freeze the account until compliance is established.
What to Set Up Before the First Deposit
Opening the account is step one. A few things need to be in place before client money arrives, because the compliance rules apply from the first deposit.
Set up a client ledger system. The ABA Model Rules on Client Trust Account Records require detailed financial records retained for at least five years after the representation ends; some states extend this to seven, so check your jurisdiction.4American Bar Association. ABA Model Rules on Client Trust Account Records – Rule 1 At minimum you need receipt and disbursement journals, individual ledgers for each client showing all transactions and running balances, bank statements and canceled checks (including records of electronic transfers with the name of the person who authorized them), copies of accountings sent to clients, and monthly reconciliation reports.
Plan on reconciling the account monthly from the start. The core compliance tool is a three-way reconciliation that matches the adjusted bank balance, your trust ledger balance, and the sum of your individual client ledger balances. If those three numbers don’t match, something is wrong, and the sooner you find it the easier it is to fix.
Know your withdrawal rules before you earn a fee. Advance fees stay in trust until the work is performed, and most jurisdictions require written notice to the client before you move earned fees out of trust — typically identifying the services performed, the amount, the planned withdrawal date, and the remaining trust balance. Some states require the notice at least five business days before disbursement; others allow same-day withdrawal if the client received advance written notice of that billing procedure at engagement. Leaving earned fees in trust is itself commingling, because the money is now yours and doesn’t belong in an account designated for client property.
Finally, calendar your ongoing filings. Many jurisdictions require an annual Trust Accounting Compliance Certification attesting that your trust accounts are being maintained according to the rules. Missing the deadline can result in late fees — some jurisdictions charge $300 or more — and, if ignored, suspension proceedings. Update your trust account registration whenever you change firms, add partners, or move to a different approved institution. The account you just opened is an obligation that runs for as long as you hold other people’s money.