Each summer, Maryland lawyers renew their law licenses. As part of this process, we pay our yearly Client Trust Fund dues, report on pro bono hours and certify that we have a trust account that complies with the Maryland Rules. Setting up the trust account is easy. The more challenging part, especially for many small firms and solo practitioners, is keeping the books as required by the rules. It is this more challenging part that often gets lawyers in trouble, as the consequences for mismanagement of the account can be severe.
To begin with, Attorney Trust Accounts are governed by Chapter 400 of Title 19 of the Maryland Rules. (See Md. Rules 19-401 through 19-414.) These 14 rules clearly describe who must maintain a trust account, where you can maintain your trust account, the records you must keep, reconciliation requirements, prohibited transactions and what to do when/if funds are abandoned.
In my experience, very few lawyers face discipline for intentionally taking client funds. While stories of lawyers stealing client funds can be front-page news, I am glad these headlines are few and far between. Unfortunately, for many small firms, there are still often many cases that arise from mismanagement of the firm’s trust account.
As such, I thought it might be helpful to review the basics of managing the account. A good primer can be found at the Maryland Legal Services Corporation’s IOLTA page.
First, nearly every attorney must have an IOLTA account. In general, unless the firm has an average of less than $3,500 per month of client funds, the account must be an IOLTA held at an approved financial institution. The account must be titled as an “Attorney Trust Account.” (Md. Rule 19-406.)
Those are the easiest parts. The more difficult part is the management of the account.
Regarding deposits, absent a specific rule or other law, attorneys must deposit all client funds into the trust account. (Md. Rule 19-404.) And, with few exceptions, only client funds can be deposited in the trust account. (Md. Rule 19-408(a).)
Further, Md. Rule 19-301.15 dictates that even most flat fees should be placed in trust and transferred when the fees are earned. This is a change from years past, when there was some discretion about when fees in flat-fee cases were considered earned. Because prepayment of fees must be deposited into the trust account, client payments for anything other than an open invoice or cost are best placed in trust and transferred to operating when earned, rather than into the operating account and then transferred to trust. For some lawyers and banks, this may create an issue when clients make electronic payments.
Regarding disbursements to clients or payment of fees, lawyers can make trust disbursements via electronic transfer; however, cash disbursements or checks payable to cash are prohibited. (Md. Rule 19-410.)
Recordkeeping presents perhaps the most challenging part of trust accounting. Recordkeeping is governed by Md. Rule 19-407. Firms must keep both a general ledger and a client-specific ledger. All transactions must be documented, and each month, the account must be reconciled. (See Md. Rule 19-407(b).)
A triple reconciliation where the bank statement, the general trust ledger and the client-specific ledgers all match proves effective. These records can be kept electronically, but the firm must have the ability to print or provide paper evidence of trust transactions and reconciliations. (Md. Rule 19-407(c).) The monthly reconciliation process is also a good time to transfer earned fees, check to see if funds have been abandoned and complete other administrative processes.
To help manage the trust account, firms that do not have an in-house bookkeeper or accountant might consider an outside service with experience assisting law firms. Experience teaches that many of you are terrific lawyers but need help with the math part of the practice of law. Remember in law school, “I was told there would be no math?” Well, there is a lot of math in running a law firm. Don’t be afraid to ask for help if you need it.
Craig Brodsky is a partner with Goodell, DeVries, Leech & Dann LLP in Baltimore. For over 25 years, he has represented attorneys in disciplinary cases and legal malpractice cases, and he has served as ethics counsel to numerous clients. His Legal Ethics column appears monthly in The Daily Record. He can be reached at csb@gdldlaw.com.
This article originally appeared in The Daily Record on September 3, 2026.
Goodell DeVries defends various professionals in Maryland, the District of Columbia, and Virginia, including lawyers and law firms. Many of these cases are ethics matters involving Bar Counsel. If you have questions about the above or are a Maryland lawyer facing discipline, please contact us at EthicsHelp@gdldlaw.com.
