Illinois Client Trust Accounting: Helping Lawyers Navigate the New Rules
Illinois client trust accounting is a critical area of compliance for legal professionals, and the recent amendments to the Illinois Rules of Professional Conduct have reshaped how attorneys must handle funds. Effective July 1, 2023, the Illinois Supreme Court implemented substantial revisions to Rule 1.15, breaking it into several more focused rules, including Rules 1.15A and 1.15B. These changes aim to simplify language, promote better understanding, and provide detailed, structured guidance on maintaining trust accounts.
Under these new Illinois trust accounting rules, attorneys must maintain a strict separation between their own funds and those of their clients or third parties. The amendments prohibit cash withdrawals from client trust accounts and require that all transactions be clearly documented. Importantly, lawyers must understand which types of fees must be held in trust versus which are considered earned upon receipt.
The focus of Rule 1.15 has shifted from general safekeeping of property to specific practices, with Rule 1.15A emphasizing required records and reconciliations, and Rule 1.15B addressing the use and oversight of IOLTA accounts. These rules were introduced to clarify expectations, enhance transparency, and strengthen fiduciary responsibility.
Whether you manage a solo practice or are part of a large firm, it’s essential to stay updated on these developments. Maintaining compliance with the revised Illinois trust accounting rules not only protects client interests—it also protects your license and reputation. In the following sections, we’ll explore what has changed and how you can implement best practices under Rules 1.15A and 1.15B.
Amendments to Rule 1.15 and the Creation of Rules 1.15A & 1.15B
On March 1, 2023, Rule 1.15—formerly titled 'Safekeeping Property'—and Rule 1.5 on fees were amended to simplify language and clearly outline a lawyer’s ethical duties in managing fees, trust accounts, and property held in trust. These changes took effect on July 1, 2023. The revisions reorganized Rule 1.15 into four distinct rules to make them easier to understand and apply in practice.
The new Rule 1.15, now titled 'General Duties Regarding Safekeeping Property,' reaffirms that client funds must be kept separate from the lawyer’s own funds and adds a clear directive prohibiting unauthorized use. Notably, new paragraph (g) prohibits cash withdrawals from a client trust account. New comments to the rule also define the concept of 'conversion' and provide practical guidance on accepting electronic payments.
Descriptions of common retainer types—previously located in comments to Rule 1.15—are now codified in amended Rule 1.5 under paragraph (d). These changes distinguish between types of fees that must be held in trust and those that are the lawyer’s property upon receipt.
New Rule 1.15A, titled 'Required Records,' consolidates the recordkeeping obligations previously found in old Rule 1.15(b)(1)-(8) and introduces paragraph (c) outlining how to perform a proper three-way reconciliation.
Rule 1.15B, 'Trust Accounts and Overdraft Notification,' establishes detailed requirements for maintaining IOLTA accounts, managing real estate transaction disbursements, handling overdraft notifications, and addressing unidentified funds.
Rule 1.15C contains definitions relevant to the new rules, many of which were previously found in former Rule 1.15(j). Together, these amendments serve as the foundation for sound Illinois trust accounting procedures.
Required Records Under Rule 1.15A
A key component of Illinois trust accounting is maintaining thorough records for client trust accounts. Rule 1.15A outlines the documentation lawyers must prepare and preserve for at least seven years after the end of representation. These requirements promote transparency and accountability and ensure that lawyers can demonstrate compliance in the event of an audit or complaint.
Lawyers may maintain records electronically, photographically, or in any other medium—as long as they are readily accessible and printable upon request. Required records include:
Checkbook Register
Receipts Journal
Disbursements Journal
Client Ledger Pages
Quarterly Three-Way Reconciliation Reports
The three-way reconciliation is a critical tool for ensuring accuracy in Illinois trust accounting. It compares the balance on the bank statement with the total of individual client ledger balances and the balance in the checkbook register. These three totals must always match. If they don’t, the discrepancy must be investigated and resolved promptly.
Rule 1.15A(c) outlines how to properly conduct a reconciliation. Failing to do so regularly can lead to undetected errors or worse—client funds being misapplied. Additionally, under Supreme Court Rule 756(d), lawyers must annually report whether they or their firm maintained a client trust account, reinforcing the importance of accurate records.
Requirements for IOLTA Trust Accounts Under Rule 1.15B
Rule 1.15B provides the framework for determining how client or third-party funds should be held. Under Illinois trust accounting rules, all such funds must be deposited into an IOLTA (Interest on Lawyers Trust Account) unless the funds can otherwise generate net income for the client. If the latter applies, the funds must be deposited in a separate, interest-bearing non-IOLTA account designated for that specific client.
Net income is defined as interest earned on the account that exceeds the costs of maintaining it. Lawyers are prohibited from using trust accounts that do not yield interest or dividends. These changes are designed to ensure that clients benefit from any potential income their funds may generate, rather than defaulting to non-earning accounts.
Attorneys must use eligible financial institutions that are authorized to operate in Illinois and comply with Rule 1.15B’s overdraft notification provisions. In addition, the institution must offer IOLTA accounts that meet the comparable rate and reporting standards.
Determining the appropriate type of account involves considering multiple factors:
Amount of funds deposited
Expected duration of the deposit
Institution’s interest rates
Cost of administering a non-IOLTA account
Sub-accounting capabilities for client-specific interest
Other circumstances affecting net interest potential
Properly applying these criteria helps ensure lawyers are acting in the best financial interest of their clients while remaining compliant with Illinois trust accounting obligations.
Staying Ahead of Illinois Trust Accounting Compliance
The recent overhaul of Illinois trust accounting rules marks a significant shift in how lawyers must manage client funds. With Rule 1.15 now reorganized into distinct, clearer components—particularly Rules 1.15A and 1.15B—Illinois attorneys are expected to meet a higher standard of diligence, documentation, and transparency. These changes aren’t just procedural; they reflect a growing emphasis on client protection, ethical stewardship, and risk mitigation within the legal profession.
To remain compliant, law firms must commit to proactive financial management practices. This includes understanding which fees require trust account deposits, conducting regular three-way reconciliations, and ensuring all trust accounts are maintained with approved financial institutions. The prohibition of cash withdrawals and the mandatory use of interest-bearing accounts further reflect the Illinois Supreme Court’s focus on accountability and client benefit.
These reforms may require adjustments to internal procedures, staff training, and greater coordination with financial professionals. However, the long-term benefits—minimized risk of disciplinary action, enhanced client confidence, and streamlined recordkeeping—make compliance well worth the investment.
To stay up-to-date on the latest developments for Illinois lawyers, contact the risk management and lawyer malpractice policy team at ISBA Mutual Insurance Company.
