Client Trust Account Guidelines for Attorneys

California law requires attorneys who handle client funds or funds entrusted by others to hold them in one or more interest-bearing bank accounts labeled as a “trust account,” or words of similar import.

Types of client trust accounts

Your financial institution can help you evaluate whether or not it is possible to earn income for the client, taking into consideration the amount of interest an individual client’s funds must generate to be practical in light of the costs involved in earning and accounting for the interest. Factors that must be considered in making this determination are stated in the Rules of the State Bar of California, title 2, division 5, rule 2.110(A).

Non-IOLTA trust accounts

Client funds that can earn revenue for the client in excess of the costs to hold those accounts must be deposited into a non-IOLTA trust account such that all interest accrues for the benefit of the client.

Interest on Lawyers’ Trust Accounts (IOLTA)

Client funds that are nominal in amount or are on deposit for such a short period of time that the funds cannot earn net income (income over costs) for the client must be deposited or invested by attorneys into pooled IOLTA on which the interest or dividends are paid to the State Bar (Business & Professions Code sections 6091.2, 6211, 6212, and 6213). The interest generated by the IOLTAs is collected by the Legal Services Trust Fund Program and distributed to about 100 nonprofit legal aid organizations that provide civil legal aid to those unable to afford it.

New reporting obligations to financial institutions

Effective January 1, 2026, new requirements under Business and Professions Code section 6091.3 and rule 2.5 of the Rules of the State Bar will apply to all licensees who establish or maintain client trust accounts.

  • Starting January 1, 2026, licensees must provide the name and State Bar license number of the “designated licensee,” defined in Rules of the State Bar, rules 2.4(D) and 2.5(E), to the financial institution when opening a new client trust account.
  • For existing client trust accounts, licensees must provide the designated licensee information to the financial institution between January 1 and July 1, 2026.
  • Solo practitioners are the “designated licensee.” Firms with two or more licensees must determine one “designated licensee” for each trust account. The designated licensee must be a signatory on the account and is responsible for performing or supervising the monthly reconciliations.
  • If a designated licensee becomes inactive, ineligible to practice, or leaves the firm, a new designated licensee must be assigned within 30 days, or the account must be closed.

Licensees must use the State Bar’s Notice to Financial Institutions to Establish a Trust Account and Provide Designated Licensee Name and State Bar Number form to report the required information to their financial institutions.

Attorneys and firms also have an ongoing responsibility to update the designated licensee information within 30 days of a designated licensee becoming inactive with the State Bar, becoming ineligible to practice law, or ceasing to be employed by or in practice with a firm.

The completed form must be submitted to the financial institution in compliance with Section 684.115 of the Code of Civil Procedure. A copy of the form should also be taken to the local branch where the account is held.

Opening a trust account

  • Take a copy of the Notice to Financial Institutions to Establish a Trust Account and Provide Designated Licensee Name and State Bar Number (94-6001385) to your financial institution, including designated licensee information.
  • If you are opening an IOLTA, the financial institution where you establish the account will document the State Bar’s tax ID number to send the interest or dividends to the State Bar.
  • If you are opening a non-IOLTA on behalf of one client, the client’s taxpayer identification will be documented on the account and any interest will accrue to the client.
  • Under Business and Professions Code section 6212, attorneys may only open an IOLTA at an IOLTA-eligible financial institution.
  • When your new account is established, you must report the change in trust accounts within 30 days. To do so, log in to My State Bar Profile and go to “Client Trust Reporting.” If the annual renewal cycle is open (February 1–March 30) and your new account was opened during the CTAPP reportable time period (see rule 2.4(J)), you may report the new trust account during the renewal cycle by selecting “CTAPP Annual Reporting.” If the annual renewal cycle is no longer open or you opened your account after the reportable time period (e.g., you opened the account in the current calendar year), select “Rule 2.2(C) 30-day Client Trust Account Reporting” to electronically register your new trust accounts record.
  • If you want to open an IOLTA with an institution that is not on the list of eligible financial institutions, please refer the financial institution’s representative to the State Bar’s Financial Institutions Banking Compliance webpage for information about how to become eligible.
  • While consulting this list of IOLTA-eligible financial institutions is an important starting point for deciding where to establish an IOLTA, the State Bar does not make any determination regarding the relative stability of the financial institutions on the list.

30-day notice of changes to your trust accounts

Rule 2.2(C) requires attorneys to report any changes to trust accounts within 30 days. A trust account that has been opened or closed must be updated in My State Bar Profile. Log in to your My State Bar Profile and go to “Client Trust Reporting.”

  • If the annual renewal cycle is open (February 1–March 30) and your new account was opened during the CTAPP reportable time period (see rule 2.4(J)), you may report the new trust account during the renewal cycle by selecting “CTAPP Annual Reporting.”
  • If the annual renewal cycle is no longer open or you opened your account after the reportable time period (e.g., you opened the account in the current calendar year), select “Rule 2.2(C) 30-day Client Trust Account Reporting” to electronically register your new trust account. 

If the trust account was registered by the firm’s administrator in Agency Billing, the firm administrator must update the account information on behalf of associated attorneys. See agency billing step-by-step guidance to report client trust account updates.

Leadership Banks and interest rates

There are more than 180 California IOLTA-eligible financial institutions. Through the years, many financial institutions have taken a leadership role by increasing rates and reducing or waiving fees on IOLTAs. The generosity of these banks has increased access to justice for hundreds of thousands of people who otherwise would have nowhere to turn for help. The financial institutions identified as Leadership Banks provide increased interest, free of fees, to maximize their impact on civil legal aid across the state.

The amended Business and Professions Code sections 6091.2, 6211, 6212, and 6213 require California lawyers to place IOLTAs only at financial institutions that pay dividends or interest rates to IOLTA customers comparable to rates paid to similarly situated non-IOLTA customers, in addition to other requirements.

Bank stability concerns

Lawyers may have concerns about their obligations to properly maintain client funds due to concerns with bank stability. The following links and information are offered to assist lawyers in addressing these concerns.

The Federal Deposit Insurance Corporation (FDIC) provides general information about fiduciary bank accounts, including information on FDIC insurance for such accounts. Credit unions may have insurance offered by the National Credit Union Administration (NCUA). The availability of FDIC/NCUA insurance may not be determinative of whether a particular deposit fully complies with a lawyer’s fiduciary duties. The State Bar’s Handbook on Client Trust Accounting for California Attorneys includes basic information on this issue.

Although rule 1.15 and the IOLTA requirements establish State Bar disciplinary and regulatory standards, they do not resolve potential concerns about a lawyer’s liability for client funds in the event of a bank failure.

While this is a legal and risk management issue beyond the scope of the State Bar’s regulatory function, for research guidance, the State Bar Ethics Hotline is citing a non-California decision where malpractice liability was not found when an attorney deposited funds in a bank that was subsequently closed and placed into FDIC receivership.

In Bazinet v. Kluge (N.Y.A.D. 1 Dept., 2005) 788 N.Y.S.2d 77 [14 A.D.3d 324], the New York Appellate Division found that the lawyer did not know that the bank was in danger of closing and that the proximate cause of the loss was “the bank’s unforeseen demise.” As suggested by this case, foreseeability is a key element.

If you have further questions, you may wish to contact the State Bar Ethics Hotline, which provides research assistance on professional responsibility issues.

Fees and charges

Banks that are not a Leadership Financial Institution may charge monthly fees, such as fees in lieu of a minimum balance, federal deposit insurance fees, per-check and per-deposit charges, and sweep fees against interest earned. If so, it is the responsibility of the attorney to pay these business fees incurred in the ordinary course of business, such as charges for check printing, deposit stamps, insufficient funds, collections, wire transfers, and cash management. If the bank does not waive monthly and other fees in excess of interest or dividends earned on an account, those expenses must be charged to the attorney.

For IOLTA, in the event that fees routinely exceed interest earned and are charged by the bank to the attorney, the attorney may apply to the Legal Services Trust Fund Program to convert the IOLTA to a noninterest-bearing trust checking account. In that case, the State Bar’s tax ID number will be removed from the account, and the attorney will be responsible for all fees and charges incurred to maintain the account.

Monitoring IOLTAs

The terms and conditions of IOLTAs are determined by the bank and are not the responsibility of the California IOLTA program. An attorney’s obligation to comply with account terms and conditions and to monitor accounts for irregularities are the same for IOLTAs as for an attorney’s non-IOLTAs. Attorneys do not have any obligation to monitor a financial institution’s compliance with IOLTA-eligibility requirements or to ensure that appropriate interest or dividends are paid to the State Bar on IOLTAs. The California IOLTA program will monitor statutory compliance and will notify the attorney if a financial institution is not complying with IOLTA requirements.

Additional information

The Handbook on Client Trust Accounting for California Attorneys is a practical guide created to help attorneys comply with the record-keeping standards for client trust accounts, including IOLTA. The handbook includes the standards and statutes relating to trust accounting, a step-by-step description of how to maintain a client trust account, and sample forms. For general requirements regarding trust accounts and record-keeping standards, see Rules of Professional Conduct, rule 1.15.

If you have questions about ethics, contact the Ethics Hotline at 800-2ETHICS (800-238-4427). You may also submit a Licensee Records and Compliance Inquiry form or read our IOLTA FAQs.

Related links