--- title: "Trust accounting & handling client money" url: "https://ailawframework.com/obligations/trust-accounting-and-handling-client-money" type: "obligation" site: "AI Law Framework" id: "A41" task_count: 5 last_reviewed: "2026-09-23" --- # Trust accounting & handling client money > Keep control of client money with authorised people and established trust processes. Verify payment instructions, reconcile source records and document the required approval before any movement of funds. Canonical page: https://ailawframework.com/obligations/trust-accounting-and-handling-client-money Last reviewed: 2026-09-23 Site index for agents: https://ailawframework.com/llms.txt ## Key facts - Tasks: 5 - Green: 0, Yellow: 3, Red: 2 - Levels: Green is AI drafts and the lawyer checks; Yellow is lawyer and AI draft together; Red is the lawyer writes and AI may only check, clarify or collect data. ## Principles - **Define the matter**: Confirm the client’s instructions, jurisdiction, intended output and the information available before dividing the work. - **Reconcile the figures**: Trace every relied-on figure to its source, confirm dates and assumptions, and independently recalculate totals or derived amounts. - **Confirm the source material**: Check the work against the original records and identify omissions, contradictions and unresolved information. ## Checklist - Trace every relied-on figure to its source, confirm dates and assumptions, and independently recalculate totals or derived amounts. - Resolve exceptions and record the responsible lawyer’s approval of the exact output and intended use. ## Restrictions - Confirm firm, client and applicable court or professional restrictions before using any AI feature. ## Jurisdiction note Apply this guidance to the actual matter and jurisdiction. Confirm current requirements before relying on an example. ## Basis Practice guidance supports planning; the responsible lawyer confirms the scope, evidence and review requirements for the matter. Trust money is governed by strict-liability rules under the Legal Profession Uniform Law. An AI error in a reconciliation, a disbursement instruction or a ledger entry has immediate regulatory consequences and is never excused by 'the tool did it'. ## Limits on AI assistance Red lines — never in this area ## Limits on AI assistance AI must never instruct, calculate, authorise or be the sole record of a trust disbursement, transfer or reconciliation. Verify every payee and bank-account detail through an independent channel — Business Email Compromise / payment-redirection fraud is the leading practice-fraud vector and AI cannot validate payee details. No client, account or transaction data into any non-approved tool. - AI must never instruct, calculate, authorise or be the sole record of a trust disbursement, transfer or reconciliation. - Verify every payee and bank-account detail through an independent channel — Business Email Compromise / payment-redirection fraud is the leading practice-fraud vector and AI cannot validate payee details. - No client, account or transaction data into any non-approved tool. ## Review checklist The lawyer's review checklist ## Review checklist Authorised principal sign-off on every trust movement Independent (call-back) verification of changed bank details Monthly reconciliation human-performed and signed No trust data in consumer AI tools - Authorised principal sign-off on every trust movement - Independent (call-back) verification of changed bank details - Monthly reconciliation human-performed and signed - No trust data in consumer AI tools ## Tasks (5) | Task | Level | How AI is used | What the lawyer must review | | --- | --- | --- | --- | | [Reconcile the trust ledger to the bank and the matter files](https://ailawframework.com/obligations/trust-accounting-and-handling-client-money/reconcile-the-trust-ledger-to-the-bank-and-the-matter-files.md) | Red | Compare the trust ledger, the bank statement and the matter authorities and list unmatched items, timing differences and missing authorities. | Have an authorised principal verify every unmatched item against source documents Have a principal, not the tool, sign the monthly reconciliation | | Draft a trust receipt or disbursement instruction from the authority | Yellow | Produce a first-draft receipt or disbursement instruction from the signed authority, the ledger balance and the payee details on the file. | Confirm amount, payee and matter allocation against the file before anything is issued Do not let the tool move money | | Build an unmatched and unidentified trust-money list | Yellow | From the ledger and the bank, list unidentified receipts, stale balances and items with no current matter authority, with dates. | Check the local unclaimed-money rules and their time limits Do not treat a generated 'unidentified' tag as authority to return or take to office | | Check a trust-to-office transfer against the bill and the authority | Red | Compare the proposed transfer, the rendered bill and the trust authority and list amounts that do not match or that would overdraw the matter. | Confirm the client has been given a bill, unless the current rule allows transfer without one Have the principal authorise the transfer | | Prepare a trust-inspection pack from the ledgers and authorities | Yellow | Assemble a pack index of reconciliations, authorities, trial balances and sample disbursements, marking missing months. | Prepare the pack for the inspector or examiner Do not let the tool fill a gap with a generated ledger | ## Jurisdiction notes ### Australia #### 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. ### New Zealand #### 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. - Do not let a tool authorise a trust-account payment or complete a CDD or suspicious-activity decision. - Do not let a tool complete a monthly trust reconciliation as the final signed position. Sources: - [NZLS: trust account management](https://www.lawsociety.org.nz/professional-practice/legal-practice/trust-account-management/) (checked 2026-09-23) - [Lawyers and Conveyancers Act (Trust Account) Regulations 2008](https://www.legislation.govt.nz/secondary-legislation/pco-drafted/2008/183/en/latest/) (checked 2026-09-23) - [Lawyers and Conveyancers Act 2006](https://www.legislation.govt.nz/act/public/2006/1/en/latest/) (checked 2026-09-23) ### United States Local name: Trust accounting and handling client money #### 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. - Do not allow a tool to send client money. Reconcile to the bank, not to a generated ledger. Sources: - [ABA Model Rule 1.15, Safekeeping Property](https://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/rule_1_15_safekeeping_property/) (checked 2026-09-23) - [ABA Formal Opinion 512, Generative Artificial Intelligence Tools (29 July 2024)](https://www.americanbar.org/content/dam/aba/administrative/professional_responsibility/ethics-opinions/aba-formal-opinion-512.pdf) (checked 2026-09-23) *Practice guidance for planning and review. Confirm current primary sources and the requirements of the actual matter. This is general information, not legal advice.*