New York Attorney Trust Account (IOLA) Requirements

An Attorney in the State of New York is required to open an Attorney Trust Account when in the possession of a client’s funds (including escrow monies). The establishment of this account is to ensure that a lawyers funds and the funds of clients are maintained separately pursuant to NY R.1.15(a), NY R.1.15(b)(1) and Disciplinary Rule 9-102(a) and (b). An Attorney is prohibited from commingling their funds with those of there client. Further, the Attorney is prohibited from using the funds of there client or in other words an Attorney must not misappropriate the funds of a client.

Judiciary Law – JUD § 497 provides guidance on decision making in whether to open an interest-bearing account or IOLA account. In the vast majority of instances a IOLA account would be appropriate but it is up to the judgement of the Attorney.

The account shall be opened in a New York located branch of a banking institute that has agreed to reporting bounced checks to the NY client protection fund.

The practice documents that should be maintained (for a period of 7 years) pursuant to NY Rule 1.15(d) and Disciplinary Rule 9-102 are as follows:

1. Retainer and Fee agreements;
2. Disbursement statements and communications for all funds disbursed to a client or on their behalf including billing statements; and
3. Records of payments to other lawyers and non-employees for services rendered.

The banking documents that should be maintained pursuant to NY Rule 1.15(d) and Disciplinary Rule 9-102 (for a period of 7 years) are as follows:

1. Bank Statements;
2. Copies of cancelled imaged checks (prenumbered); and
3. Copies of deposit slips.

Additional source documents that should be maintained pursuant to NY Rule 1.15(d) and Disciplinary Rule 9-102 (for a period of 7 years) are as follows:

1. Checkbooks; and
2. Check stubs.

Accounting documents that should be maintained pursuant to NY Rule 1.15(d) and Disciplinary Rule 9-102 (for a period of 7 years) are as follows:

1. Receipts Journal;
2. Disbursements Journal; and
3. Individual Client Ledgers.

Additional safeguards beyond the rule that are best business practices that provide internal controls over your NY IOLA Attorney Trust Account:

1. Checkbook register/overall account register with a running balance;
2. An Attorney Ledger Card for funds deposited that are reasonable to cover bank charges;
3. Client identification in the memo section of Attorney Trust Account checks (file/matter no. or client last name);
4. Monthly Attorney Trust Account Reconciliations (three-way reconciliations): Bank Reconciliation, Book Reconciliation and Client Ledger Listing Balance. (All three should match).;
5. Creating an aging list (which could be your listing of client balances) which would show the last time a matter was active, to ensure that funds are promptly disbursed and clients are able to be located;
6. Review of cancelled check images to review for any inconsistencies including fraud or misappropriation by an employee or non firm member; and
7. Review of outstanding checks to see if checks are old and stale and need to be reissued.

An Attorney in New York is obligated pursuant to NY Rule 1.15(d) and Disciplinary Rule 9-102 to do the following:

1. Promptly notify clients and third parties of funds received in which the party has an interest;
2. Maintain client funds separately from the lawyers funds and maintain such funds inviolate;
3. Maintain complete records of the handling of said funds; and
4. Promptly disburse funds in which the parties are entitled to receive.