Client Trust Account (IOLTA) Reconciliation - Alabama

CLIENT TRUST ACCOUNT (IOLTA) RECONCILIATION — ALABAMA

Account and Period Information

I. Purpose and Governing Rule

This worksheet documents the periodic three-way reconciliation of a client trust account maintained under Ala. R. Prof. C. 1.15, which requires an Alabama lawyer to hold the property of clients and third persons separate from the lawyer's own property and to maintain complete records of trust funds.

Reconciliation frequency. Ala. R. Prof. C. 1.15(e)(9) requires reconciliation of the trust account on at least a quarterly basis. The Alabama State Bar's Trust Accounting for Alabama Attorneys handbook strongly recommends performing the reconciliation monthly, as soon as each bank statement is received, as the safer practice. This worksheet is structured for either cadence; select below.

☐ This reconciliation is performed monthly (recommended)
☐ This reconciliation is performed quarterly (rule minimum under Rule 1.15(e)(9))

Three-way reconciliation. A complete reconciliation requires that three independently derived balances agree as of the reconciliation date:

1. the adjusted bank balance (Section II(a));
2. the checkbook / control (book) balance (Section II(b)); and
3. the sum of all individual client-ledger balances (Section II(c)).

II. Three-Way Reconciliation

(a) Adjusted Bank Balance

Deposits in Transit

Outstanding Checks

(b) Checkbook / Control (Book) Balance

(c) Sum of Individual Client-Ledger Balances

Three-Way Comparison — All Three Must Agree

☐ RECONCILED — all three balances agree
☐ NOT RECONCILED — complete Section IV

III. Client Ledger Schedule

IV. Exception / Variance Investigation

☐ No variance identified — the three balances agree to the penny.

☐ Variance identified. Amount of difference: $[____]

Items investigated:
☐ Bank error / unposted bank transaction
☐ Unrecorded deposit or disbursement
☐ Duplicate or transposed entry
☐ Math error on a client ledger
☐ Bank service charge debited against principal
☐ Stale / outstanding check over 90 days
☐ Other: [________________________________]

Explanation and corrective action:

[____________________________________________________________]

[____________________________________________________________]

Date variance resolved: [__/__/____] Resolved by: [________________________________]

V. Alabama Trust-Accounting Compliance Checklist

☐ No commingling — only client/third-person funds (plus a minimal amount for bank charges, if applicable) are held in the account
☐ No negative client-ledger balances exist (no client's funds used to cover another's)
☐ Earned fees and reimbursed costs were withdrawn promptly once fixed (not left in trust; not withdrawn before earned)
☐ Advance fees and unearned funds remain in trust until earned/incurred
☐ Each client/matter has a current individual ledger showing date, amount, source, payee, and balance
☐ Trust records (ledgers, journals, bank statements, canceled check images, deposit slips, reconciliations) are retained for at least six (6) years (Alabama retention standard)
☐ The account is held at an eligible Alabama institution that has agreed to report insufficient-funds / overdraft activity to the Alabama State Bar
☐ The account is enrolled in IOLTA (or a proper non-IOLTA individual interest-bearing account is used where funds are large enough or held long enough to earn net interest for the client)
☐ Interest on the IOLTA account is remitted at least quarterly to the Alabama Law Foundation
☐ Annual IOLTA certification was completed during the September 1 – October 31 certification window (or exemption claimed because no commingled non-interest-bearing client trust account is maintained)
☐ Reconciliation performed at least quarterly per Rule 1.15(e)(9) (monthly recommended)

VI. Preparer and Reviewing-Attorney Certification

I certify that I prepared/reviewed this three-way reconciliation, that it was performed in accordance with Ala. R. Prof. C. 1.15, that all client and third-person funds are accounted for, and that no funds have been misappropriated or improperly commingled. Any variance has been documented in Section IV.

Preparer Signature: ________________________________ Date: [__/__/____]

Preparer Printed Name / Title: [________________________________]

Reviewing Attorney Signature: ________________________________ Date: [__/__/____]

Reviewing Attorney Printed Name / Bar No.: [________________________________]

Alabama Practice Notes

• Safekeeping rule. Ala. R. Prof. C. 1.15 governs safekeeping of client and third-person property. The IOLTA and trust-account operational requirements (eligible institutions, interest remittance, recordkeeping, reconciliation) are set out in Rule 1.15(e).
• Reconciliation frequency. Rule 1.15(e)(9) requires reconciliation at least quarterly. The Alabama State Bar handbook recommends monthly reconciliation as the safer practice. Confirm the current text of Rule 1.15(e) before relying on the quarterly minimum.
• Record retention. Alabama State Bar guidance directs attorneys to retain trust-account records for at least six (6) years. Verify against the current Rule 1.15(e) text, which controls.
• IOLTA program. Administered by the Alabama Law Foundation (ALF). Effective February 2025, the Alabama Supreme Court designated ALF as the sole recipient of IOLTA interest (previously attorneys could also designate the Alabama Civil Justice Foundation). Annual certification runs September 1 – October 31.
• Overdraft / insufficient-funds notification. Eligible institutions must agree to report insufficient-funds activity on lawyer trust accounts to the Alabama State Bar; maintain the account only at an institution that has agreed to do so.
• Unsettled / verify: the exact subsection numbering within Rule 1.15(e) (including the reconciliation provision cited here as (e)(9)) and the current list of allowable bank fees should be re-verified against the official rule text, as Alabama has amended the IOLTA provisions over time.

Sources and References

• Ala. R. Prof. C. 1.15 (official rule PDF)
• Alabama State Bar — Trust Accounting for Alabama Attorneys Handbook
• Alabama Law Foundation — IOLTA Info for Lawyers