- Strict New Hampshire Rules: New Hampshire lawyers must follow specific trust account rules (Supreme Court Rule 50 and NHRPC 1.15) to protect client funds. Mishandling a client trust account is taken very seriously – even technical violations receive careful scrutiny by regulators. Law firms can face audits, fines, or worse if they don’t strictly comply with trust accounting requirements.
- Mandatory IOLTA Compliance: New Hampshire requires attorneys to use IOLTA (Interest on Lawyers’ Trust Accounts) for short-term or nominal client funds, per Supreme Court Rule 50. The interest earned on pooled IOLTA accounts is forwarded to the NH Bar Foundation to fund legal aid programs. Firms must use approved banks (that report overdrafts to regulators), maintain detailed records, and even file an annual Trust Accounting Compliance Certification (Supreme Court Rule 50-A) to stay in good standing.
- Best Practices & Tech Tools: Proper trust accounting means segregating client money, tracking every transaction with individual client ledgers, reconciling accounts regularly, and avoiding pitfalls like commingling or premature withdrawals. Modern legal tech (like LeanLaw’s trust accounting features) can automate many of these processes, helping New Hampshire firms simplify IOLTA record-keeping, prevent mistakes, and streamline compliance reporting.
Trust accounting isn’t just an administrative chore for New Hampshire attorneys – it’s an ethical obligation with high stakes. The NH Supreme Court and Attorney Discipline Office closely monitor how lawyers handle client funds. In fact, state rules even require banks to notify the Attorney Discipline Office of any trust account overdraft, and bar authorities warn that if an audit or complaint finds you out of compliance, you should “be prepared for a tough ride”. The message is clear: mismanaging client funds can quickly lead to disciplinary trouble. On the other hand, participating in the IOLTA program also contributes to the greater good – since its 1982 inception, New Hampshire’s IOLTA accounts have generated over $40 million for civil legal services and education in the state. In short, New Hampshire law firms must diligently manage their trust accounts both to protect clients and to meet their legal and ethical duties.
This comprehensive guide will walk through New Hampshire’s specific IOLTA and trust accounting rules (including the roles of Rule 50, Rule 50-A, and Rule 1.15), provide step-by-step best practices for handling client funds, highlight common pitfalls (and how to avoid them), and discuss how legal accounting tools like LeanLaw can support your trust compliance efforts. With the right processes (and a bit of technology), even busy small and mid-sized firms in New Hampshire can master trust accounting and keep client funds safe.
Understanding IOLTA and Trust Accounts in New Hampshire
What is IOLTA? IOLTA stands for Interest on Lawyers’ Trust Accounts, a nationwide program where lawyers pool small or short-term client funds in a special interest-bearing trust account. New Hampshire was an early adopter – the NH Supreme Court established its IOLTA program in 1982, making it only the second IOLTA program in the United States. The concept is simple: any client funds that are too nominal or held too briefly to earn net interest for the client must be placed in a pooled IOLTA account. The interest from these accounts does not go to the lawyer or client; instead, banks send it to the New Hampshire Bar Foundation, which uses the money to fund charitable legal aid and public education programs. In other words, IOLTA turns the “spare change” interest on client trust money into funding for access to justice.
Why do IOLTA accounts matter? For attorneys, an IOLTA account is both a practical tool and an ethical requirement. It allows you to safely hold client funds without incurring the cost of setting up separate accounts for every small deposit, and it ensures compliance with rules prohibiting holding client money in your business accounts. For the community, IOLTA accounts matter because they support critical legal services – New Hampshire’s program has funded tens of millions of dollars in aid for the disadvantaged.
How does IOLTA work in NH? Under Supreme Court Rule 50, all New Hampshire attorneys in private practice must participate in IOLTA unless expressly exempt. Practically, this means every firm needs to create or maintain a pooled, interest-bearing trust account for client funds that are “nominal in amount or to be held for a short period of time.” When you open an IOLTA account, you use the Bar Foundation’s tax ID number (since the Foundation receives the interest) and your account title must indicate it’s a trust/IOLTA account (for example, “Client Trust Account – IOLTA – [Firm Name]”). Your bank will send any interest earned to the Bar Foundation (typically quarterly) and will waive routine service charges or charge them to the lawyer, not to the client funds. If a particular client’s funds are substantial or will be held long enough to earn net interest for that client after bank fees, then you should not put those funds in IOLTA – instead, open a separate interest-bearing trust account for that client so they can receive the interest. (Rule 50 expects attorneys to use their judgment here; consider factors like the amount, expected duration, interest rates, and bank fees.) In all other cases, client money goes into the pooled IOLTA.
Bottom line: An IOLTA account in NH is essentially a required, pooled trust account for miscellaneous client funds – it’s how you comply with the mandate to safeguard client money and how you contribute to statewide legal aid. Every small or mid-sized firm that holds client funds will need an IOLTA account and should understand the obligations that come with it.
New Hampshire’s Rules and Ethical Requirements for Trust Accounts (Rule 50, 50-A, and RPC 1.15)
New Hampshire’s trust accounting requirements come from a combination of court rules and ethics rules. The key authorities are:
- NH Supreme Court Rule 50 (“Trust Accounts”): This rule establishes the IOLTA program and lays out how client trust accounts must be handled. It requires every lawyer (not exempt under narrow exceptions) to maintain a pooled IOLTA for nominal or short-term funds. It also sets the standards for trust accounts – for example, the account must be at an approved financial institution in NH (federally insured and authorized to do business in the state). The bank must pay a comparable interest rate and is directed to remit interest to the Bar Foundation and report any insufficient funds or negative balance to the Attorney Discipline Office. Rule 50 further spells out detailed recordkeeping and reconciliation requirements for attorneys (more on that below), and even addresses nuances like handling bank service charges and what types of retainers must go into trust. In short, Rule 50 is the procedural playbook for trust accounts in NH.
- NH Supreme Court Rule 50-A (“Trust Accounting Compliance Certification”): New Hampshire uniquely requires an annual certification of trust account compliance. Every year by July 1, each active NH attorney must file a Trust Accounting Certificate of Compliance with the Supreme Court (submitted via the NH Bar Association). In practice, the Bar Association sends out a prescribed form with your annual dues notice – you have to confirm whether you maintain a trust account and that it is managed in accordance with the rules. Failure to file on time can result in fines or sanctions, so this is not a mere formality to ignore. The annual certification forces lawyers to actively attest to their trust accounting practices, which underscores how seriously the state treats this issue. It’s wise to use the certification as a yearly “check-up” on your procedures (e.g. ensuring you have done all reconciliations, reviewed the rules, and corrected any issues before you certify).
- NH Rule of Professional Conduct 1.15 (“Safekeeping Property”): This is the ethical rule that underpins why and how lawyers must safeguard client funds. It mirrors the ABA Model Rule 1.15 with New Hampshire specifics. Key mandates of Rule 1.15 include: keep client funds separate from your own, promptly notify clients or third parties when you receive funds on their behalf, and promptly deliver funds that the client or third party is entitled to receive (e.g. settlement proceeds). It forbids commingling (you cannot deposit personal funds into client trust accounts, except minimal amounts to cover bank fees), and it requires comprehensive recordkeeping. NHPRC 1.15 works hand-in-hand with Supreme Court Rule 50 – for instance, 1.15 and Rule 50 both mandate that you maintain detailed records for each client and preserve those records for six years after final distribution of the funds. In essence, Rule 1.15 is the ethical backbone: it establishes why misuse of client funds (even unintentional) is a serious ethical breach.
Together, these rules mean New Hampshire lawyers must be extremely diligent with any money that isn’t theirs. Every dollar of client money – whether it’s a settlement, retainer advance, filing fee, or escrow for a closing – must be deposited into a trust account, not your operating account. You can only withdraw those funds for the client’s matter (e.g. to pay a client’s bills, to disburse settlement monies, or to transfer earned fees to your firm once you’ve billed them). You must also maintain meticulous records showing whose money is whose at all times. The total in the bank should always equal the sum of all individual client sub-account balances, and you need to prove that with regular reconciliations. New Hampshire’s rules explicitly require a monthly reconciliation of your trust account records to the bank statement, including both the overall account and individual client ledgers. This means if you’re a law firm handling client funds, you should be balancing your trust account every month without fail.
Another unique aspect in NH: even if you don’t currently have any client funds, you still likely need to certify compliance annually and keep up-to-date. For example, if you close your trust account or you practice in a way that you never handle client money (rare, but some in-house counsel or certain government attorneys might be exempt), you have to note that. Otherwise, the safer default is to maintain an IOLTA account and the habit of compliance – it’s often when attorneys think the rules don’t apply to them that they get caught off guard. The New Hampshire Supreme Court has made clear that trust accounting rules apply to every lawyer, no matter how you style your practice (you can’t avoid them by calling yourself a “settlement agent” or “title company,” for instance).
In summary, New Hampshire’s legal framework for trust accounts demands strict segregation, detailed accounting, and proactive oversight. By understanding Rule 50, 50-A, and RPC 1.15, you lay the foundation for compliant handling of client funds. Next, we’ll translate those rules into concrete steps your firm should follow.
Detailed Steps for Proper Trust Accounting in New Hampshire
Following a step-by-step process can make trust accounting more manageable. Here’s a breakdown of how a small or mid-sized firm in New Hampshire should handle client funds from start to finish:
1. Open the right trust account (IOLTA) at an approved bank. Start by setting up a dedicated IOLTA trust account with a bank authorized to do business in NH (and ideally one that participates in the NH Bar Foundation’s IOLTA program at favorable interest rates). Use the Bar Foundation’s taxpayer ID on the account so that interest is reported to them, and ensure the account name clearly includes “IOLTA” or “Clients’ Funds” and your firm name. You’ll need to sign the NH Bar Foundation’s Authorization form for financial institutions, which instructs the bank on IOLTA requirements – to remit interest to the Bar Foundation and to alert the Attorney Discipline Office of any overdraft. Tip: Setting up the account is usually straightforward – many banks are familiar with IOLTA. Just be sure to also arrange for online access and monthly statements, since you’ll be reconciling frequently.
2. Always deposit client funds promptly into the trust account. Whenever you receive money that belongs (in whole or in part) to a client or third party – whether it’s an advance fee retainer, a settlement check, or closing proceeds – do not delay in depositing it into your trust account. New Hampshire rules expect prompt action, and holding a check in your drawer for days could be seen as mishandling funds. Make sure checks are made out to your trust account (e.g. “Law Firm Trust Account”) when possible. Never deposit client money into your firm’s operating account or a personal account – doing so is considered commingling and is a serious violation. It’s wise to stamp checks “For Deposit Only – Trust Account” immediately upon receipt. For electronic payments, work with your payment processor to ensure the funds go into the trust account by default. If you receive cash, deposit the exact cash amount to trust (don’t use it for anything else). Every deposit should be recorded in your ledger system at the time of deposit, crediting the specific client.
3. Determine if funds should be in IOLTA or a separate interest-bearing account. As noted, most routine client funds will go into your pooled IOLTA account. However, if you receive a large amount of money to hold for a long period, calculate whether it could earn net interest for the client. For example, if you’re holding $200,000 for a year for a client, that interest is not “nominal” – it likely exceeds the bank fees and you should set up a separate interest-bearing trust account for that client’s benefit. On the other hand, a $5,000 retainer for a litigation matter that will be billed over a few months is usually appropriately placed in IOLTA (the interest on $5k for a short time wouldn’t meaningfully exceed bank costs). Use your best judgment and when in doubt, consult Rule 50 or the Bar Foundation guidance. Remember, the default in NH is if it’s nominal or short-term, it must be IOLTA. Failing to use IOLTA when required (or conversely, siphoning client interest you shouldn’t) can lead to compliance issues. If you do open a separate trust account for a client, maintain all the same safeguards (segregation, records, reconciliation) for that account as well.
4. Maintain detailed ledgers for each client and matter. New Hampshire requires that you keep a separate accounting page or ledger for each client for whom you hold funds. In practice, this means your trust accounting system should always be able to show exactly how much money you hold for each client (and even each matter, if clients have multiple matters). When you deposit funds, record the entry under that client’s ledger with the date, amount, source, and purpose (e.g. “10/15/2025 – $5,000 received from Client X as advance fee for Matter Y”). The cumulative balance for that client increases by that amount. Do this for every client. Similarly, when you disburse or transfer funds, record it under that client’s ledger (with date, amount, payee/destination, and purpose). At all times, you should be able to add up the balances of all client ledgers and have the sum match your total bank balance. Keeping individual ledgers is critical – it’s not enough to just track the overall account balance. Use software or spreadsheets that allow per-client tracking. Best practice: also keep a general receipts and disbursements journal for the trust account and retain all deposit slips, wire confirmations, and cancelled checks as backup.
5. Only disburse funds for proper purposes, and only when funds have cleared. When it comes time to pay money out of the trust account, be extremely careful to disburse only in accordance with the client’s matter. Proper disbursements include things like: paying a client their settlement proceeds, paying a third-party lien or invoice on behalf of the client (with client authorization), refunding unused retainer to the client, or transferring earned fees to your firm’s operating account once you’ve performed the work and invoiced the client. You should never withdraw cash from a trust account (it’s a big red flag in any audit). Do not write checks to “Cash”. Ideally, disburse by check to specific payees or by electronic transfer with a clear record. Crucially, make sure the funds you are disbursing have actually cleared the bank. New Hampshire’s rules (and common sense) forbid paying out funds that haven’t cleared – for instance, if you deposit a client’s personal check today, you cannot immediately write a trust check against those funds tomorrow. Wait until the deposit is verified and the bank confirms you have collected funds available. RPC 1.15(e) explicitly requires lawyers to wait for funds to be deposited, credited, and available before disbursing against them. This protects you from a scenario where a check bounces and your trust account goes negative because you already paid out money (which would be a violation and trigger that bank notice to the ADO). A good practice is to implement a waiting period (e.g. do not disburse for 7-10 days if the deposit was a personal or business check) unless the bank explicitly confirms clearance sooner. If the client needs money faster, consider options like wire transfers or certified checks, which clear more quickly – but always follow Rule 1.15’s mandate on “good funds.”
Additionally, do not pay yourself (the firm) until fees are earned. Unearned client funds (e.g. an advance retainer) must remain in trust until you have earned them by doing the work and billing the client. Only after sending an invoice or obtaining the client’s consent can you transfer that amount from trust to your operating account. Never “borrow” from the trust account – even temporarily. For example, you cannot take money for personal use reasoning that “I’ll replace it when the client’s check clears” or pay yourself a fee on Friday because a client verbally agreed, but the written authorization or billing isn’t done yet. Any premature withdrawal of client funds is considered misappropriation, even if you intended to put it back. The safest course is to require a written notification or invoice to the client before any trust funds flow to your firm. This creates a clear paper trail that those funds became earned fees.
6. Reconcile the trust account regularly (preferably monthly). Reconciliation is your number-one detective tool to catch errors or discrepancies. New Hampshire’s Rule 50 effectively mandates monthly reconciliation of your trust account records with the bank statement. This involves three things: (a) comparing your total trust account balance as per your records to the balance on the bank statement, (b) totaling up all individual client ledger balances and ensuring that sum matches the same bank balance, and (c) reviewing any outstanding checks or deposits in transit that might cause timing differences. In a proper three-way reconciliation, all three figures (bank balance, total of client ledgers, and a running checkbook balance if you keep one) are compared and any variance is explained. For example, if the bank statement is through September 30 and shows $100,000, but you have an outstanding check for $5,000 that hasn’t cleared, your adjusted bank balance would be $95,000 – which should match exactly the total of all client ledger balances on that date. If it doesn’t match, you must investigate and resolve the issue immediately (it could be a data entry error, a bank error, or worst-case, funds misplaced). Document each reconciliation and retain a copy (either printed or saved PDF of the reconciliation report and bank statement) for at least six years. Many bookkeeping software packages won’t easily reproduce a reconciliation report from years ago, so keep physical or PDF records. Frequent reconciliation is not just a rule – it’s a best practice to protect you. If you reconcile monthly, you’ll quickly catch mistakes like math errors, bank fees taken out (which should be replenished by you, not client funds), or even internal fraud.
7. Retain records and stay organized. New Hampshire requires that all trust account records be preserved for a minimum of six years after the final distribution of funds. In practice, you should keep: client ledgers, journals of account activity, bank statements, canceled checks (or images), deposit slips, wire confirmations, duplicate deposit receipts, copies of client checks or payment instruments, engagement agreements regarding fees, invoices or billing records that correlate to any trust withdrawals, and the annual trust compliance certificates you file. Organize these records by year and client. If the Attorney Discipline Office ever audits you (whether from a random audit program or in response to a complaint or overdraft notice), you’ll need to produce these records to demonstrate compliance. It’s much easier to maintain them as you go than to scramble later. Consider using both a digital system (accounting software, scanned documents) and a physical file for critical records. Redundancy can save you if a file is lost or a backup fails.
8. Be vigilant about closing matters and disbursing remaining funds. When a client’s case is over or their balance is supposed to be zero, make sure to promptly refund any leftover trust money to the client (or pay all final bills) so that you’re not holding small sums indefinitely. Leaving small amounts (“residual balances”) in trust is a common mistake. If a client cannot be found to return money to, New Hampshire has procedures (often involving making diligent attempts and then eventually remitting unclaimed funds to the general treasury or possibly to the Bar Foundation after a period of time – check NH’s unclaimed property rules or Bar guidance). Do not simply keep orphaned funds in the trust hoping the client will call someday, and absolutely never transfer them to your own account. Every dollar in trust must belong to a client or third party; if not, it shouldn’t be there.
9. Complete your annual Trust Account Compliance Certification. Each year, as mentioned, you must submit the Rule 50-A certification. Use this as an internal deadline to self-audit your trust practices. Before filing, review your records: Is every month’s reconciliation done and in the file? Do the balances check out? Are all client matters accounted for? The certification form will typically ask you to affirm you have a trust account or that you don’t handle funds, and that you have complied with Rule 50. Ensure you can truthfully check those boxes. If you realize you’ve fallen behind (perhaps you missed a reconciliation or found an accounting error), address it immediately – fix the books, replenish any shortages out of your own pocket (then figure out what went wrong), and get guidance if needed. It’s better to proactively correct an issue than to let it fester. After filing your certificate, keep a copy with your trust records for that year.
By following these steps, your firm will create a strong routine for handling client money. Consistency is key – trust accounting isn’t a one-time setup, but an ongoing process every time money comes in or goes out. Next, let’s examine some common mistakes even well-intentioned lawyers make, so you can avoid those pitfalls.
Common Pitfalls in NH Trust Accounting (and How to Avoid Them)
Even with rules and procedures in place, mistakes happen. Here are some of the most common trust accounting pitfalls for New Hampshire law firms, along with tips on how to avoid them:
- Commingling funds (mixing client money with personal or firm funds): This is the cardinal sin of trust accounting. Commingling can be intentional (e.g. using client funds to pay firm expenses) or unintentional (e.g. depositing a settlement check into the wrong account). Except for a small buffer to cover bank fees, you cannot keep any of your own money in the trust account. Likewise, client funds shouldn’t sit in your business account. Avoidance tip: Maintain separate accounts and do a brief mental check for every transaction – ask “Is this money client money or firm money?” If it’s client money, it always belongs in trust. If you need to pay a bank fee or correct a minor overdraft, you may deposit a modest amount of your funds for that purpose, but document it carefully and only use it for fees, not as a cushion to cover mistakes.
- “Borrowing” or advancing funds from trust: Some lawyers have gotten in trouble for treating the trust account like a short-term loan source – covering one client’s disbursement with funds from another, or paying themselves early on a fee. Any temporary shortfall or negative balance in an individual client’s ledger is a huge red flag (and likely will trigger an overdraft report to the ADO if the bank catches it). For example, if you write a check for Client A’s obligation but accidentally use Client B’s funds waiting for A’s check to clear, you’ve effectively borrowed B’s money – that’s misappropriation. New Hampshire disciplinary authorities will not care that you “had the money coming in tomorrow” – it’s still a violation today. Avoidance tip: Never disburse more for a client than that client currently has in trust. Use software that prevents this or always double-check the client ledger balance before any withdrawal. If you realize a mistake (say, you paid out of the wrong client sub-account), immediately transfer your own firm funds to cover the shortfall, then correct the entries – and report the incident if required. Prompt self-correction can be a mitigating factor, whereas hiding it is compounded misconduct.
- Failing to do monthly reconciliations (or not truly reconciling three ways): Skipping reconciliations is like flying blind. It’s easy to assume your records are fine when they might not be. Some attorneys have fallen into trouble by letting the trust account go unreconciled for long periods – by the time a discrepancy is discovered (often via audit or a client complaint), it’s a mess. New Hampshire’s Rule 50(2)(F) explicitly requires monthly reconciliations and even details how to do them. Another related pitfall is doing a half-hearted reconciliation (e.g. just comparing the checkbook to bank statement, but not verifying individual client balances). Avoidance tip: Treat reconciliation as sacred as paying your rent – put it on your calendar for the first week of every month. Use a three-column approach: bank balance vs. total client ledgers vs. adjusted book balance. If you’re not sure how to do a three-way reconciliation, get training or use a tool (LeanLaw or your accountant can help automate this). Always investigate differences, no matter how small. And retain proof of each reconciliation. Remember, the burden is on you to demonstrate compliance in an audit, so keep those reports.
- Not keeping adequate records or backing them up: In today’s digital age, some lawyers assume their accounting software or bank statements alone are sufficient. But Rule 50 requires quite specific records (ledger for each client, etc.), and you need to be able to show compliance even years later. One NH ethics article noted that relying solely on software without printing reports could leave you unable to prove your accounting in a future audit. Pitfall example: An attorney who can’t produce a ledger for a client from 4 years ago because their software changed or data was lost will have a problem. Avoidance tip: Maintain both electronic and hard copy records. At minimum, print or PDF your monthly trust ledger and reconciliation reports and file them. Preserve records for at least six years (the rule minimum) – many firms keep them longer. Also, document communications related to trust funds (e.g. if a client says “use $X for my bills,” keep that email or note).
- Misunderstanding “non-refundable” fees and retainers: A common area of confusion is whether a fee can bypass the trust account because it’s labeled “non-refundable” or “flat fee.” Under NH Supreme Court Rule 50(2)(C), certain true retainers (fees earned upon receipt for availability) need not be placed in trust. However, the NH Bar cautions that non-refundable fees are largely disfavored and most fees billed in advance are considered client property until earned. Many lawyers mistakenly put a “non-refundable retainer” into their operating account upfront – only to be disciplined later because that fee was deemed unearned. Avoidance tip: Unless you have a rare arrangement that clearly qualifies as an engagement retainer (paid solely to secure your availability and reasonable in amount), you should assume advance fees belong in trust until work is done. Always check Ethics Committee guidance if you plan to make a fee non-refundable. The safer practice with flat fees is to put them in trust and then withdraw as you earn them (or use the Bar’s approved alternative of withdrawing at specific milestones, with client consent, per Ethics Opinion guidance). When in doubt, err on the side of treating funds as client property.
- Disbursing funds before they’ve cleared (the “uncollected funds” problem): We touched on this in the steps, but it’s worth emphasizing as a pitfall. Lawyers sometimes feel pressure from clients to disburse quickly – for example, a client wants their settlement money immediately upon signing the agreement. If the settlement check is not yet cleared, paying out could result in a bounced trust check, which is disastrous. Even if the intent was good, you’ll have violated Rule 1.15(e) by not waiting for funds to be available. Avoidance tip: Build in realistic expectations with clients: explain that “funds must clear the bank” and give a timeline. For real estate or personal injury cases, many attorneys have standard language that disbursements occur X days after deposit. Use certified checks or wired funds for faster availability when appropriate, but always verify with your bank that funds are collected. It’s better to have one uncomfortable conversation about a short wait than to face discipline for an overdraft.
- Assuming the rules don’t apply to you or your practice: Some lawyers mistakenly believe that if they don’t call something a trust account or if they operate under a different title (like acting as a settlement agent), they can bypass trust rules. New Hampshire has explicitly rejected this line of thinking – if you are a lawyer handling client funds, the trust accounting rules apply, period. In one cautionary note, the NH Supreme Court noted a lawyer cannot avoid these duties by labeling themselves a “closing company”. Avoidance tip: Embrace the rules rather than fight them. Even if you are in a practice area with industry norms (like real estate closings) where non-lawyer companies handle funds differently, as a lawyer you are held to the attorney standard. This means maintaining a trust account for things like closing proceeds, not mingling them with business accounts, and following all the same ledgers and reconciliations. When in doubt, follow the stricter standard – it’s both the safest and required route for lawyers.
- Ignoring the annual compliance certification or other administrative requirements: Each year, a handful of attorneys neglect to file their Trust Account Compliance form (Rule 50-A) or pay their fees, and face penalties. It’s an avoidable problem. The certification isn’t just a bureaucratic box to tick – it’s your pledge of compliance. Missing it can draw unwanted scrutiny (Why didn’t you certify? Are you hiding something?) and can lead to fines or even a suspension if left unaddressed. Avoidance tip: Mark the annual deadline (July 1) on your calendar and treat the certification seriously. If you truly don’t handle any client funds, you still need to respond accordingly. And if you do, use the form as your yearly audit reminder as discussed. Keep copies of what you submit.
By learning from these common pitfalls, your firm can tighten up its procedures. In many disciplinary cases, the underlying issue wasn’t an intention to steal client money; rather it was sloppiness, lack of oversight, or not understanding the rules. Fortunately, those are preventable problems. In the next section, we’ll discuss some overarching best practices (a sort of compliance checklist) to ensure your trust accounting is always above reproach.
Best Practices and Compliance Checklist for NH Trust Accounts
Staying compliant with New Hampshire’s trust accounting rules is much easier when you incorporate best practices into your firm’s everyday procedures. Below is a practical compliance checklist and tips that busy attorneys and firm administrators can use to keep their IOLTA accounts in order:
- Segregate all client funds from firm funds: Always use a dedicated trust account for client money. No exceptions. Keep operating and trust accounts separate – ideally at different banks or at least clearly labeled – to avoid any confusion. The trust account should only hold client or third-party funds; your firm’s money stays in your business account. This physical separation is the first line of defense against commingling.
- Use proper account labeling and tracking: Make sure your trust account’s name includes identifiers like “Trust Account,” “IOLTA,” or “Client Funds” along with your firm name. Internally, label each deposit or withdrawal with the associated client matter. Good labeling forces good behavior – if you can’t easily identify what a withdrawal was for, it probably shouldn’t have happened.
- Follow the “no cash” rule: Avoid cash transactions in trust. Do not accept large amounts of cash from clients if possible (it complicates recordkeeping enormously), and never withdraw cash. Use checks or electronic transfers that leave a clear paper trail. If a client insists on paying in cash, deposit it immediately to the trust account – don’t use it directly to pay anything.
- Reconcile monthly, without fail: Perform a monthly three-way reconciliation of the trust account (bank balance = total of client ledgers = adjusted book balance). This should be a formal process, not a quick glance. Document the reconciliation with dated workpapers or a software report. If you have multiple trust accounts (e.g. IOLTA and a separate one for a large client), reconcile each. Assign this task to a responsible individual (e.g. firm bookkeeper) but ensure an attorney (or two) reviews and signs off on it. Regular reconciliations catch issues early and are expected by regulators.
- Maintain individual client ledgers and a general journal: Keep a running ledger for each client that shows all inflows/outflows and the current balance. Also maintain a general trust account journal or register listing every transaction in chronological order. This double-record system will make reconciliations and audits much smoother. It’s also helpful for answering client inquiries like “How much of my retainer is left?”
- Retain records for at least six years: As required by Rule 50(2)(B) and RPC 1.15, keep all trust account records for six years after the termination of a representation. Consider keeping them longer if space permits. This includes bank statements, canceled checks, deposit slips, ledgers, journals, reconciliation reports, and any written communications about trust funds. Having a well-organized archive (physical or digital) will save you stress if you ever need to respond to a compliance audit or a client’s question down the line.
- Implement internal controls and oversight: Even in a small firm, it’s wise to have some checks and balances. For example, require two signatures for any trust check above a certain amount, or have a second person review any trust disbursement before it’s made. Partners or firm owners should periodically review the trust account activity, even if they don’t do the day-to-day bookkeeping. This isn’t about distrust – it’s about ensuring no single point of failure. Many embezzlement cases at law firms involve a single employee or partner who had unchecked control. Regular oversight can deter and detect wrongful activity.
- Train your team on trust accounting basics: Don’t assume your staff or new associates know these rules – teach them. Paralegals, bookkeepers, and attorneys who handle client funds should be briefed on at least the fundamentals: never mix funds, get deposits in promptly, no out-of-trust payments without clearance, etc. Make trust accounting a part of your firm’s orientation and written procedures. The NH Bar Association offers resources and even ethics hotlines for questions – use them if uncertain.
- Plan for contingencies: What if the responsible attorney is on vacation or leaves the firm? Make sure more than one person knows how to access the trust account and the records (while still limiting access appropriately). Also, consider what happens if a trust check bounces or an error is discovered – have a protocol: e.g. immediately notify the firm owner, deposit replacement funds, inform the client if necessary, and determine if you need to self-report anything. Having a plan can prevent panic and missteps in a crisis.
- Use technology to your advantage: While you must adhere to traditional recordkeeping requirements, modern accounting software – especially those tailored for law firms – can significantly ease the burden. Tools like LeanLaw, paired with QuickBooks Online, can automate ledger management, flag errors, and generate compliance reports with a few clicks (more on this in the next section). Even if you use generic software or spreadsheets, familiarize yourself with features that can help (for instance, QuickBooks can reconcile accounts and track classes for client matters if set up properly). Just remember that software is a supplement, not a substitute – you need to know what the software should be doing to verify it’s done right.
- Regularly review the rules and stay up-to-date: Laws and rules can change. For example, interest rate comparability requirements or the exact deadline for certifications might be updated by the court. Make it a habit to review Rule 50 and RPC 1.15 at least annually (the Bar Association often publishes reminders or changes). Also watch for any guidance from the NH Attorney Discipline Office or Bar’s Ethics Committee about trust accounting. By staying current, you won’t be caught off guard by a new requirement.
Think of this checklist as part of your firm’s quality control. Just as you wouldn’t file a brief full of typos, you don’t want sloppy trust records. Demonstrating a consistent pattern of adherence to best practices will not only keep you out of trouble, but also gives clients confidence that their funds are in good hands. Next, we’ll explore how leveraging legal tech solutions can make many of these best practices easier to implement consistently.
How Legal Tech (Like LeanLaw) Can Help with IOLTA Compliance and Trust Accounting
Managing a trust account manually – with spreadsheets and paper ledgers – can be time-consuming and nerve-wracking. Fortunately, technology can shoulder much of that burden. Legal-specific accounting software, such as LeanLaw integrated with QuickBooks Online, is designed to simplify trust accounting and reduce the risk of human error. Here are a few ways software tools can help New Hampshire firms stay compliant with IOLTA and trust accounting rules:
- Automated Three-Way Reconciliation: Keeping the bank, your client ledgers, and your accounting records in sync is one of the toughest parts of trust accounting. LeanLaw’s trust accounting features include built-in three-way reconciliation that continuously syncs your bank balance, your trust ledger, and the corresponding QuickBooks ledger. In practice, this means at any given moment you can see that your books match the bank, and each client’s balance is accurate. The software essentially performs a mini-reconciliation each day as transactions occur, and it can generate formal reconciliation reports on demand or on a schedule. By automating this process, you’re always ready for your monthly reconciliation – rather than scrambling to compile data, you just review and approve the software’s work.
- Error Prevention and Alerts: Good legal accounting software will enforce many of the rules we’ve discussed. For instance, LeanLaw will not let you overdraft a client’s trust balance when entering a disbursement – if you attempt to record a payment that exceeds the funds available for that client, it will flag an error. This prevents the common mistake of accidentally using one client’s money for another’s bill. The software also keeps operating and trust funds segregated within the system, so you won’t accidentally post a trust transaction as an operating expense or vice versa. Some tools even allow you to set alerts: for example, you could get notified if a client’s trust balance falls below a set amount (handy for retainer replenishment) or if funds have been sitting untouched for a long time (prompting you to reach out to the client or consider if they should be returned or escheated). These safeguards act like a built-in compliance officer, catching issues before they turn into rule violations.
- Integrated IOLTA accounting in workflows: Modern practice management software can integrate trust accounting directly into your billing workflow. For example, LeanLaw allows you to easily apply trust funds to an invoice and then handles the accounting behind the scenes. Say you have a client with $2,000 in trust and you’ve just finalised a $1,500 bill for services. With software integration, when you generate the invoice, it can show the client’s trust balance on the statement and let you one-click apply the $1,500 from trust to pay that invoice. LeanLaw will automatically decrement the client’s trust balance, record the trust withdrawal, and properly credit your operating account in QuickBooks – all in one workflow. What used to require writing a check from trust, depositing it to the operating account, and making multiple accounting entries can become a seamless process. This not only saves time but reduces the chance of error (for instance, forgetting to update a ledger or double-paying yourself). Every trust payment applied is tied to an invoice, creating a clean audit trail.
- Clear audit trails and reporting: Every transaction entered in a dedicated system is tracked and tied to the appropriate client matter. You can easily pull reports showing all trust activity for a period, or a ledger report for a specific client, or even a list of all clients with current trust balances. If the NH Attorney Discipline Office ever asks for records, you can export the data knowing it’s complete and consistently recorded. LeanLaw, for example, maintains all the required details (date, payor/payee, purpose) in each entry, satisfying the recordkeeping rules. Many platforms also let you attach documents to transactions – so you could attach a scanned image of a check or the deposit slip right to the deposit entry, meaning later on you have the source document at your fingertips. This level of organization can significantly cut down the time needed to assemble information for the annual compliance certificate or in response to an audit. Instead of sifting through boxes of papers, a few clicks produces a complete packet of trust records.
- State-specific compliance settings: Some legal accounting tools build in state-specific requirements. For instance, they know that New Hampshire uses IOLTA through the Bar Foundation, so they may prompt you to label the account accordingly or include fields for capturing data like the bank’s IOLTA interest rate or the Bar Foundation’s tax ID. Software can also be configured to adhere to New Hampshire’s six-year record retention by preventing deletion of old transactions and maintaining an archive. While you should always verify settings, using a product that caters to lawyers means many of these NH-specific nuances (like “no commingling except service charges” or “overdrafts must be reported”) are considered in the design.
- Peace of mind through permission controls and logs: With software, you can often set permissions so that, for example, only partners can approve trust disbursements above a threshold, or only certain users can enter trust transactions. The system will log who entered or changed a transaction and when. This creates accountability within your firm. If something goes awry, you can audit the log to see what happened. Such controls echo best practices (like two signatures on checks) in a digital way.
Of course, no software will eliminate the need for attorney oversight – you still need to review your reports and use sound judgment. But leveraging technology can dramatically reduce manual workload and the likelihood of mistakes. Many New Hampshire firms, especially smaller ones, might hesitate to adopt another software tool. However, consider the trade-off: the time saved on tedious accounting tasks can be redirected to billable work or client service, and the confidence gained in compliance is invaluable (who wants to lose sleep worrying if they remembered to log a transfer?). In short, legal tech like LeanLaw can be a smart investment for trust accounting peace of mind. It automates the heavy lifting while keeping you firmly in control and in compliance.
FAQ: New Hampshire IOLTA and Trust Accounting
Q1: What is an IOLTA account and do I need one in New Hampshire?
A: An IOLTA account (Interest on Lawyers’ Trust Account) is a special pooled trust account that lawyers use to hold client funds which are either small in amount or will be held for a short time. In New Hampshire, IOLTA accounts are mandatory for virtually all private practice attorneys who handle client money. Under Supreme Court Rule 50, if you are holding client funds that are not immediately due to be earned by you or disbursed to the client, you must deposit them into a trust account. For most routine client matters, that will be your pooled IOLTA account. (If a client’s funds are large enough or will be held long enough to earn net interest for that client, then you should open a separate interest-bearing account for that client’s benefit – but that’s the exception.) So yes, practically every NH law firm that handles client money needs an IOLTA account. It’s not only a compliance requirement but also a way to ensure you’re handling client property responsibly. The upside is that by using IOLTA, you also contribute to funding legal services for those in need, since the account’s interest goes to the Bar Foundation’s charitable programs.
Q2: What exactly is the NH Bar Foundation’s role in IOLTA?
A: The New Hampshire Bar Foundation administers the IOLTA program. When your bank remits interest from your IOLTA account, it goes to the Bar Foundation’s IOLTA Grants Fund. The Bar Foundation then uses that money to provide grants to organizations that offer free or low-cost civil legal aid, and to support law-related education initiatives. Essentially, the Bar Foundation is the steward of the funds generated by IOLTA – turning bank interest into justice funding. The Bar Foundation also sets some guidelines in partnership with the court: for example, they work with banks to encourage higher interest rates on IOLTA accounts (through a “Leadership Bank” program that many banks opt into), and they provide the authorization forms that lawyers use to set up IOLTA accounts properly. They also keep records of IOLTA participation and interest remittances. For attorneys, you mostly interface with the Bar Foundation when opening your account (sending them the form) and indirectly through your bank’s interest payments. If you have questions about IOLTA specifics, the Bar Foundation is a great resource – they can tell you which banks offer the best rates or help with any quirks in setting up an account. But day-to-day, you operate the account; the Foundation just handles the interest and grantmaking.
Q3: What are the key trust accounting rules in NH that my firm should be aware of?
A: New Hampshire has several critical trust accounting rules you must follow. Here are the top points:
- Segregation of Funds: Keep client funds separate. All client money goes into a trust account, never your operating account. Likewise, don’t pay personal or firm expenses from the trust account. The only personal funds you may keep in trust are a small amount to cover bank service charges (usually under $100). No other commingling is allowed – each client’s money is held for them, not for your use.
- IOLTA vs. Individual Accounts: Use a pooled IOLTA account for client funds that are nominal or short-term. If a client entrusts you with a large sum for a long period, consider a separate interest-bearing trust account for that client so they earn the interest – this is both a fiduciary duty and a Rule 50 requirement (funds “reasonably expected to earn net interest” should not go to IOLTA). Use your judgment on this, and when in doubt, consult the rule or the Bar Foundation.
- Approved Institutions & Overdraft Alerts: Your trust account must be held at an approved financial institution (federally insured, licensed in NH) that has agreed to the IOLTA conditions. Notably, the bank must agree to notify the NH Attorney Discipline Office if your trust account is ever overdrawn. This means any bounced trust check or negative balance will quickly come to the attention of regulators. Always choose a bank from the Bar’s list of IOLTA-participating institutions (most major NH banks qualify).
- Timely Deposits and Proper Disbursements: When you receive client funds, deposit them to trust promptly (typically the same day or next business day). When paying out, do not withdraw funds until they are cleared in the account. Also, only disburse for legitimate purposes: to the client, to a third party on the client’s behalf, or to your firm (but only in payment of fees/expenses that the client has been billed for or agreed to). No other withdrawals. Every disbursement should be supportable by documentation (invoice, settlement statement, etc.).
- Recordkeeping – Ledgers and Journals: You must maintain complete records of your trust account. This includes a separate ledger for each client matter showing every receipt and disbursement and the running balance. It also includes a general trust check register or journal. Record details for each transaction (date, amount, payor/payee, purpose). Keep copies of all deposit slips, checks, and wire confirmations. Backup these records because you need to keep them for at least six years after the representation ends.
- Monthly Reconciliation: Reconcile your trust account records with the bank statement at least monthly. This means ensuring that the balance per bank, the total of client ledgers, and your internal register all agree. New Hampshire expects you to do this and keep a record of each reconciliation. If you find any discrepancies (even a small $5 bank fee that wasn’t accounted for), correct them immediately (e.g., replace the $5 from your funds and label it as bank fee coverage).
- No Cash Transactions / No ATM: While not explicitly in the rule text, it’s a de facto rule from ethical guidance – don’t treat the trust account like petty cash. Do not withdraw cash or use ATMs. Every withdrawal should be by check or electronic transfer to a named recipient. This creates a clear paper trail and prevents accusations of funds going missing or being used improperly.
- Prompt Notification and Delivery: Under Rule 1.15, when you receive funds or property that a client or third person is entitled to, notify them promptly and deliver it promptly once it’s due. For example, if you get a settlement check, inform the client, deposit it, and as soon as it clears and you’ve sorted any fees or liens, distribute the client’s share. You shouldn’t hold on to client money any longer than necessary. If there’s a dispute over funds (say, a client and a medical provider both claim the same money), you must keep it in trust until the dispute is resolved.
These are the headline rules. Essentially, they boil down to one theme: be a meticulous fiduciary with client money. If you always ask yourself “If someone looked at this transaction or this record, would they see that I handled the client’s money appropriately?” you’ll be on the right track. And remember, when in doubt, seek guidance – the NH Bar’s Ethics Committee can offer informal advice, and the written Ethics Corner articles (many are on the Bar Association website) cover common trust accounting questions. It’s much better to double-check beforehand than to fix a problem later under disciplinary scrutiny.
Q4: How can LeanLaw or similar software actually help me with trust accounting – is it worth it for a small firm?
A: For many small and mid-sized firms, adopting a specialized software like LeanLaw (especially in combination with QuickBooks Online) can be a game-changer for trust accounting. Here’s why it might be worth it:
- Time savings: A lot of the manual work – calculating balances, doing reconciliations, tracking each client ledger – is automated. For example, LeanLaw will keep a continuous tally of each client’s trust balance and prevent you from overdrawing it. It can also generate reconciliation reports that match your bank balance with your ledgers in seconds. This frees up your administrative time (or your bookkeeper’s time) to focus on other tasks, which is crucial in a small firm where everyone wears multiple hats.
- Reduced errors: Humans make mistakes, especially when juggling spreadsheets or manual ledgers. Software greatly reduces data entry errors by syncing data directly from your bank and your billing system. If you enter a transaction once (say, in LeanLaw when applying a trust payment to an invoice), it flows through to QuickBooks and your trust ledger automatically. Fewer touchpoints mean fewer opportunities to make a mistake. And if something doesn’t add up, the software is more likely to flag it immediately (like a failed reconciliation or an overdraw attempt) rather than it slipping through unnoticed.
- Improved compliance: LeanLaw was built for law firms, so it incorporates compliance checkpoints. It keeps trust and operating funds separate in the books by design, generates the reports you need for oversight, and maintains an audit trail of every transaction. In essence, it’s like having a compliance assistant ensuring you follow the rules. Of course, you still need to review and supervise, but the heavy lifting is taken care of. When it comes time for your annual Trust Account Certificate, you can quickly run a report of your trust account activity for the year and confidently answer the form knowing your records are complete.
- Scalability and client service: As your firm grows or your trust activity increases, software helps you scale without dropping any balls. If you take on more clients with retainers, a tool like LeanLaw makes it easy to manage each of those balances and even show clients their trust balance on each invoice. This transparency can be a selling point for clients (it demonstrates professionalism). Moreover, if a client calls asking for their trust balance or transactions, you can retrieve it instantly, which enhances your service.
- Integration with billing: LeanLaw’s integration means trust accounting isn’t a separate chore disconnected from your billing – it’s part of your workflow. You handle client funds in context, which ensures, for example, that you only withdraw what has been invoiced (thus adhering to the “earned when billed” principle). By linking time & billing with trust management, you naturally stay within ethical boundaries (you won’t accidentally spend money that wasn’t earned, because the system ties withdrawals to invoices).
- Peace of mind: Perhaps the biggest benefit is intangible – less stress. Knowing that your trust accounts are balanced to the penny and that you have readily accessible records gives you peace of mind. You’re not second-guessing if you forgot to log something or fearing an audit. The software acts as a safety net and an organizer. Many lawyers find that this alone justifies the cost, as it lets them focus on practicing law rather than on nitty-gritty accounting details.
For a small firm, any technology investment has to be weighed against budget and learning curve. The good news is that cloud-based solutions like LeanLaw are typically subscription-based and scalable, so you can start at a level that fits your practice. They are also designed to be user-friendly (and come with support) because they know many lawyers are not accountants by trade. Most find that after the initial setup, the ongoing use is straightforward and actually simpler than their old manual methods.
In summary, while you can do everything with manual ledgers and basic accounting software, leveraging a purpose-built tool is like moving from a hand-crank to an automatic engine – it brings efficiency, reliability, and compliance features that can greatly benefit a small or mid-sized firm. If you handle even a moderate volume of trust transactions, it’s worth considering as part of your overall strategy to streamline firm operations and reduce risk.
By understanding New Hampshire’s IOLTA and trust accounting requirements, adopting strong practices, and utilizing the right tools, your law firm can confidently navigate trust accounting compliance. Trust accounting may seem onerous, but it ultimately boils down to safeguarding your clients’ money with the same care you would want for your own. With diligent effort and modern support, even the smallest New Hampshire firm can achieve a clean bill of health on its trust accounts – keeping clients protected, the courts satisfied, and your own reputation intact.
