Firm-wide obligation
Trust accounting & handling client moneyTrust accounting and handling client money
Define the intended work in Trust accounting & handling client money, confirm the applicable requirements and select a task to plan the necessary review.
Key facts
- Tasks covered
- 5
- Tasks with a step-by-step checklist
- 1
- Local differences
- 3 jurisdictions where this area changes
Jurisdiction
Tasks
GreenLawyer reviewYellowClose supervisionRedLawyer-led
| Task | How AI is used | Human involvement | What the lawyer must review |
|---|---|---|---|
| Reconcile the trust ledger to the bank and the matter files | Compare the trust ledger, the bank statement and the matter authorities and list unmatched items, timing differences and missing authorities. | RedLawyer-led |
|
| Reconcile a US client trust account against the bank | Suggest mismatches between a bank statement and a ledger export for the lawyer to investigate. | RedLawyer-led |
|
| Reconcile a New Zealand lawyers' trust account under the 2008 Regulations | Extract ledger items and unmatched amounts into an exceptions list. | RedLawyer-led |
|
| Draft a trust receipt or disbursement instruction from the authority | Produce a first-draft receipt or disbursement instruction from the signed authority, the ledger balance and the payee details on the file. | YellowClose supervision |
|
| Build an unmatched and unidentified trust-money list | From the ledger and the bank, list unidentified receipts, stale balances and items with no current matter authority, with dates. | YellowClose supervision |
|
| Check a trust-to-office transfer against the bill and the authority | Compare the proposed transfer, the rendered bill and the trust authority and list amounts that do not match or that would overdraw the matter. | RedLawyer-led |
|
| Prepare a trust-inspection pack from the ledgers and authorities | Assemble a pack index of reconciliations, authorities, trial balances and sample disbursements, marking missing months. | YellowClose supervision |
|
What changes in Australia
| Topic | What changes |
|---|---|
| Governing rules | Trust money is governed by strict-liability rules. The Legal Profession Uniform Law applies in NSW, Victoria and WA; elsewhere, check the local legal profession Act. |
| Responsibility | An error in a reconciliation, disbursement instruction or ledger entry has immediate regulatory consequences. 'The tool did it' is never an excuse. |
What changes in New Zealand
| Topic | What changes |
|---|---|
| Governing law | Lawyers and Conveyancers Act 2006 ss 110–116 and the Trust Account Regulations 2008. Not an Australian state regulation or IOLTA. |
| Who may operate | You must practise on own account as a barrister and solicitor and meet the trust-account supervisor training. |
| Barristers | Cannot operate a trust account or hold fees in advance, except through an instructing solicitor's trust account or an escrow arrangement. |
| Inspections | The Law Society Inspectorate visits on a risk-based cycle and has used Audit Assistant for reviews from 1 July 2024. |
| Limits on AI assistance |
|
- NZLS: trust account management · 2026-09-23
- Lawyers and Conveyancers Act (Trust Account) Regulations 2008 · 2026-09-23
- Lawyers and Conveyancers Act 2006 · 2026-09-23
What changes in United States
Known here as: Trust accounting and handling client money
| Topic | What changes |
|---|---|
| Model Rule 1.15 | Hold client and third-person funds separately, in the state where the office is (or elsewhere with consent), with complete records. Advance fees stay in trust until earned. |
| State rules | IOLTA, record-keeping and overdraft-notification rules add to Rule 1.15. Open the state rule. |
| AI use | A tool may draft a ledger explanation. It must not originate a disbursement or reconcile without the lawyer's check against the bank record. |
| Limits on AI assistance |
|
Precedents for this area
- Client authority to withdraw trust money for legal costs, with notice of withdrawal and pre-transfer checklist (Uniform Law) (Form, AI use Red). A client authority under r 42(4) of the Legal Profession Uniform General Rules allowing a law practice to pay its legal costs from trust money, a notice of withdrawal to send before each transfer, and a principal's pre-transfer checklist.
- Payment-redirection and deepfake call-back verification protocol for trust disbursements (Policy, AI use Red). A firm protocol that stops trust money being paid to fraudsters: bank details collected securely, changes never accepted by email, phone or video alone, independent call-back to a known number, two-person checks before each disbursement, deepfake red flags and what to do if money goes astray.
- Review checklist for AI-assisted monthly trust reconciliation (Uniform General Rules r 48) (Checklist, AI use Red). A checklist for the principal who reviews a monthly trust reconciliation prepared with AI matching: inputs and access, the statements r 48 requires, how to test the AI's matches, exceptions to investigate, master-data changes, sign-off within 15 working days, and escalation of irregularities.
- Client notice: our bank details will never change by email (payment fraud and deepfake warning) (Notice, AI use Yellow). A short, plain-English notice for clients that the firm's bank details will never change by email, how to verify before paying, how the firm will verify the client's details before paying them, a warning about AI-cloned voices and fake video calls, and what to do if something goes wrong.
- Controls standard: AI tools and trust records (read-only access, no payment functions, audit trail) (Policy, AI use Red). A firm standard for any AI tool, agent or AI feature that touches trust records: permitted and prohibited uses, read-only access with no payment or posting rights, logging and back-ups, human review, vendor checks, external examiner access and irregularity reporting.
All precedents for Trust accounting & handling client money. Signed-in accounts can read the full text.