Glossary
Trust account
A trust account is a separate bank account where a law firm holds client funds — retainers, settlements, and other monies belonging to clients — distinct from the firm's operating account.
Client money is not firm money. When a client pays a retainer or settlement proceeds arrive, those funds belong to the client until you earn them through billed work or disburse them per instruction. Mixing client and firm funds violates professional conduct rules in virtually every jurisdiction.
Trust accounts require meticulous record-keeping: individual client balances, matter-level tracking, and reconciliation against bank statements. Even small firms face serious consequences for trust account errors — from bar discipline to malpractice exposure.
Operating accounts cover firm expenses — rent, salaries, software. Trust accounts hold client funds only. Transfers from trust to operating happen when you invoice earned fees and the client authorizes payment from their balance.
LawNest Firm plan includes operating and trust accounts with client-level balance tracking, ledger statements, and the ability to apply trust directly to outstanding invoices — so you can reconcile without a separate spreadsheet.