New York Attorney Escrow Account Rules: What Rule 1.15 Requires, Paragraph by Paragraph

By Tammy Hoang, Certified QuickBooks ProAdvisor

New York imposes strict rules on the management of an attorney escrow account to protect client funds and maintain public trust. Lawyers must keep client money in clearly identified, separate trust or escrow accounts, and mixing it with personal or operating funds is prohibited. Even when no loss occurs, commingling client funds or misusing them can lead to disciplinary action, and a lawyer who holds funds as a fiduciary can also face liability to the client.

These requirements are set out in Rule 1.15 of New York's Rules of Professional Conduct (22 NYCRR 1200.0), and the rule is enforced regardless of whether any harm results. This guide reads the text paragraph by paragraph, using the version amended effective May 12, 2021, and shows what each requirement means for the books. The full text is published by Cornell's Legal Information Institute: 22 NYCRR 1200.1.15. Meeting it is a law firm bookkeeping job as much as an ethics one, because most of the rule is about records.

The Account Itself: Location, Title, and Overdraft Rules

Paragraph (b)(1) requires a lawyer holding funds that belong to another person to keep them at a banking institution within New York State that agrees to provide dishonored check and overdraft reports under 22 NYCRR Part 1300. The account must be in the lawyer's own name or the firm's name, in a special account kept separate from the firm's business and personal accounts and from any account the lawyer holds as executor, guardian, trustee, receiver, or in any other fiduciary capacity. All funds held in escrow or otherwise entrusted to the lawyer or firm go into it. The New York State Bar Association notes that every New York lawyer who handles client funds must maintain an IOLA account, and that attorneys statewide hold more than 48,000 of them across roughly 200 banking institutions.

Funds may be kept at an out-of-state bank only if that bank complies with Part 1300 and the lawyer has first obtained the written approval of the person the funds belong to, naming the office or branch where the funds will be held. One more flat rule: no special account or trust account may have overdraft protection.

Paragraph (b)(2) requires the account to be identified as an "Attorney Special Account," "Attorney Trust Account," or "Attorney Escrow Account," with checks and deposit slips that bear that title. Additional descriptive words are allowed if they distinguish the account from the firm's other accounts. For the books, the account name in the accounting system should match the bank's title exactly, and the bank should confirm in writing that no overdraft protection is linked to the account. A well-run IOLA account is easy to prove compliant on all three points. A bookkeeper near me who handles New York trust work should ask about each of them in the first week.

What May Be in the Account: Account Charges and Mixed Funds

The only firm money permitted in the account is described in paragraph (b)(3): funds reasonably sufficient to maintain the account or to pay account charges. That is slightly broader than a bare bank-fee cushion, since it covers what it takes to keep the account open, but it is still a narrow allowance. Anything beyond it is commingling client funds with firm money, and a firm should size the cushion to its actual charges and track it on its own line, away from any client's balance.

Paragraph (b)(4) covers funds that belong partly to a client or third person and partly to the lawyer. They stay in the special account, and the lawyer's portion may be withdrawn when due. If the client or third person disputes the lawyer's right to it, the disputed portion is not withdrawn until the dispute is finally resolved. The text says "may be withdrawn when due," and it does not set a deadline the way California's rule does. Because paragraph (a) bars commingling client funds, though, the safe practice is to withdraw the firm's share promptly once it is due and to record the date it became due. Advances for future costs fit the same pattern. They are entrusted funds, so they belong in the special account until they are spent, and each payment out is recorded against the client's ledger.

Notifying, Accounting, and Paying Out: Paragraph (c)

Paragraph (c) sets four duties. A lawyer must promptly notify a client or third person of the receipt of funds, securities, or other property in which they have an interest. The lawyer must identify and label securities and other property promptly and place them in safekeeping. The lawyer must maintain complete records and render appropriate accounts. And the lawyer must promptly pay or deliver to the client or third person, as requested, the funds and property they are entitled to receive.

New York's text says "promptly" for notification and does not fix a number of days, so firms should not borrow the 14-day figure from California's rule and assume it applies here. The books should still show a receipt date on every deposit into the client trust account, a record of the notice, and statements to clients showing disbursements made to them or on their behalf. Good law firm trust accounting leaves a dated trail for each of these, so that "promptly" can be demonstrated rather than asserted.

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The Records List: Seven Years, Eight Categories

Paragraph (d)(1) requires a lawyer to maintain, for seven years after the events they record:

• Deposit and withdrawal records for the special accounts and any other bank account that concerns or affects the practice of law, showing the date, source, and description of each deposit and the date, payee, and purpose of each withdrawal.

• A record for special accounts showing the source of all funds deposited, the names of the people the funds are or were held for, the amounts, and the names of everyone to whom funds were disbursed.

• Retainer and compensation agreements with clients, copies of all statements to clients showing disbursements, and copies of all bills rendered to clients.

• Payment records for lawyers, investigators, and others not in the lawyer's regular employ who were paid for services, plus copies of retainer and closing statements filed with the Office of Court Administration.

• Bank records: all checkbooks and check stubs, bank statements, prenumbered canceled checks, and duplicate deposit slips.

Paragraph (d)(2) adds that entries must be accurate and made at or near the time of the transaction. Paragraph (d)(3) allows "copies" to be kept as originals, photocopies, microfilm, optical imaging, or any medium that preserves an image that cannot be altered without detection, which is what makes scanned and digital storage workable.

The rule does not use the words three-way reconciliation, but a firm cannot show that these records are accurate without reconciling the client ledgers, the special account record, and the bank statements against each other. A monthly three-way reconciliation is how a firm produces that proof, and the Lawyers' Fund for Client Protection publishes practical materials on recordkeeping in its escrow and ethics resources. Strong law firm bookkeeping keeps all of these categories in one indexed place so that a seven-year-old record can be found in minutes. When choosing a bookkeeper near me, ask where each of these categories is stored.

Who Signs, Who Gets Paid, and Where Records Live: Paragraphs (e) Through (j)

Paragraph (e) controls how money leaves the account. All withdrawals must be made only to a named payee and never to cash. They must be made by check or, with the prior written approval of the party entitled to the proceeds, by bank transfer. And only a lawyer admitted to practice in New York State may be an authorized signatory. For the books, that means every disbursement from the client trust account carries a payee name, the signer list is reviewed against bar admission, and any transfer has the written approval on file.

Paragraph (f) covers missing clients. When money is payable to a client and the lawyer cannot locate the client, the lawyer applies to the court for an order directing payment of the fees and disbursements owed to the lawyer and the balance to the Lawyers' Fund for Client Protection. Paragraph (g) allows a court to designate a successor signatory if the sole signatory dies, and paragraph (h) requires the former partners of a dissolved firm to arrange for the (d) records to be maintained. A written plan for each of these situations, kept with the records index, is part of sound law firm trust accounting.

Paragraphs (i) and (j) are about proof. The required records must be located at, or made available at, the lawyer's principal New York office, and must be produced in response to a notice or subpoena duces tecum in connection with a complaint or investigation by a grievance or disciplinary committee, or at the direction of the Appellate Division. Records produced this way stay confidential except for the proceeding. A lawyer who does not maintain, keep, or produce the required accounts and records is in violation of the rules and subject to discipline, whether or not any client was harmed.

How Irvine Bookkeeping Keeps New York Firms Aligned With Rule 1.15?

At Irvine bookkeeping, we build the books around the rule's own paragraphs: the attorney escrow account title checked against the bank's records, overdraft protection confirmed off, a firm cushion tracked on its own line, a receipt date and notice record for every deposit, named-payee-only disbursements, an indexed seven-year records file, and a signed monthly three-way reconciliation. The attorney decides what to pay and signs the checks, because only a New York-admitted lawyer can. We make sure the records prove it.

If you have been searching for a bookkeeper near me who understands New York's Rule 1.15 text rather than a generic national template, that is what our law firm bookkeeping delivers. We keep every client trust account and IOLA account reconciled and your records review-ready, so law firm trust accounting in New York is a monthly routine, not a scramble when a subpoena arrives. QuickBooks certified.

Make Sure Your Records Can Be Produced on Request.

Talk with Irvine Bookkeeping about New York trust accounting.