Outstanding Trust Account Checks: How Long Is Too Long, and What to Do About Stale Items?
By Tammy Hoang, Certified QuickBooks ProAdvisor
Almost every law firm has one: a trust check written months ago that still has not cleared. It sits on the reconciliation as an outstanding trust account check, month after month, and everyone agrees to deal with it later. Later is the problem. An old outstanding check blurs the picture of what each client is owed, and it can mean a client has not received money that belongs to them.
This guide explains what an outstanding check does to a trust reconciliation, offers a follow-up schedule you can adopt, shows how to void and reissue without creating a new problem, and covers what to do when the payee cannot be found.
What an Outstanding Trust Account Check Does to Your Reconciliation?
When you issue a trust check, the journal and the client's ledger drop right away. The bank balance does not drop until the check clears. During the gap, the bank balance is higher than the journal balance by the amount of the outstanding check, and your client trust account reconciliation shows the difference as a listed reconciling item.
That is normal for a few days or weeks. It is not normal for months. California's Rule 1.15 requires a monthly reconciliation of the client ledgers, the account journal and the bank statements. A reconciliation that balances only because it carries a long list of old outstanding checks is balanced on paper, but it is hard to rely on.
For the routine that surfaces these items, see our guide to monthly three-way reconciliation for California law firms.
The money behind an old check still belongs to the client or third party who was meant to receive it. That is why the item deserves attention, not just a line on the report.
Good IOLTA bookkeeping treats the outstanding items list as a working document, not a footnote. Attorney trust account bookkeeping that ages each item and notes the next step makes California IOLTA compliance visible: anyone reading the reconciliation can see which items are routine and which need a call.
Law firm trust accounting is easier when the firm keeps a simple check log: check number, date, payee, client, amount and the date it cleared. A log like that turns a client trust account reconciliation from detective work into matching.
A Follow-Up Schedule for Outstanding Items
The State Bar does not publish a set number of days after which an outstanding trust check must be chased. A written firm policy fills that gap. Many firms adopt a schedule like this one:
Every month: review the outstanding items list as part of the reconciliation, and note any item older than the prior month.
At 30 to 60 days: contact the payee by phone or email to confirm the check was received, and note the date and the answer.
At about 90 days: send a written follow-up, check the payee's address and decide whether to stop payment, void and reissue.
At six months: treat the check as stale. Under the Uniform Commercial Code, a bank is generally not required to pay a check presented more than six months after its date, so the check may no longer be good.
Three months is a sensible working limit, not a legal deadline. What matters is that the firm has a policy, follows it and records each step. Documented follow-up is evidence that you are monitoring client funds.
Our guide to common errors found during bank reconciliation covers uncleared checks in a general business context.
CTAPP compliance is also about showing a routine. The self-assessment asks about your practices, and a written follow-up schedule for outstanding items is a practice you can describe with confidence. Legal bookkeeping services that include the aging list give you something concrete to point to.
How to Void and Reissue Without Creating a New Problem?
Voiding a trust check is a bookkeeping event with consequences. Done in the wrong order, it can lead to a double payment or a client ledger that no longer matches the bank. A careful sequence:
Contact the payee first to confirm the original was not received, lost or already deposited.
Place a stop payment on the original check with the bank.
Void the check in the books, which returns the amount to that client's ledger. The money is still in trust.
Issue the replacement from the trust account to the same payee, and record it against the same client.
Keep a note in the file with dates, who was contacted and what they said.
Never move money from a voided trust check into the operating account, and never reissue to a different person without written instructions. Until the funds are properly distributed, they remain client money.
Carrying old outstanding checks on every reconciliation?
Irvine Bookkeeping can clear the list and set up a follow-up routine.
Call or Text: (949) 482-2790 | irvinebookkeeping.com
Orange County firms that handle settlements and refunds issue many trust checks, and the more checks go out, the more likely one will linger. Irvine law firm bookkeeping clients get the aging list with every monthly package, and California law firm bookkeeping that includes it keeps the attorney client trust account rules from becoming a year-end scramble.
What Rule 1.15 Says About Prompt Distribution?
Rule 1.15(d)(7) requires a lawyer to promptly distribute undisputed funds that a client or other person is entitled to receive. Paragraph (f) creates a rebuttable presumption of a violation if, absent good cause, the lawyer fails to distribute undisputed funds within 45 days of the date they become undisputed. The comments also stress taking diligent steps to resolve disputes over entitlement.
A check that was written but never cashed sits in an awkward place under those provisions: the lawyer has issued payment, but the person may not have the money. If you have a long-outstanding check, ask your ethics counsel how these provisions apply to your situation. Whatever the answer, your records should show that you tried to deliver the funds and kept trying.
Primary sources: Rule 1.15 and the State Bar's CTAPP page.
The attorney client trust account rules ask for diligence, not perfection. A record that shows repeated, documented attempts to deliver funds is far stronger than one with a stale item and no notes.
When comparing IOLTA bookkeeping services, ask whether the monthly package includes an aged outstanding items list and who contacts the payee.
When the Payee Cannot Be Found?
Sometimes the follow-up fails: the address is out of date, the person has moved, or the claim never resurfaces. In that case, do not adjust the books to make the problem disappear. Keep the funds in trust, keep the client ledger open and keep a record of every attempt to reach the payee.
Useful steps include contacting the person by every method on file, checking whether another party may have the right to the money, and sending a letter by a trackable method. California also has an unclaimed property law that can apply to funds held for someone who cannot be located. Speak with an ethics attorney or your tax advisor before reporting or transferring any money, because the rules depend on the facts.
To trace a mismatch once you find one, see our guide to fixing IOLTA reconciliation errors.
How Irvine Bookkeeping Keeps Outstanding Items Under Control?
Irvine Bookkeeping provides bookkeeping for law firms in Irvine and Orange County, including IOLTA bookkeeping and monthly reconciliation. Our IOLTA bookkeeping services include an outstanding items list with every reconciliation, with each item aged and flagged for follow-up.
As an Irvine law firm bookkeeping team led by a Certified QuickBooks ProAdvisor, we deliver legal bookkeeping services and California law firm bookkeeping that support California IOLTA compliance and CTAPP compliance. Our attorney trust account bookkeeping and law firm trust accounting follow the attorney client trust account rules, with a documented client trust account reconciliation each month.
Our IOLTA bookkeeping services, attorney trust account bookkeeping and legal bookkeeping services are designed so that a stale item never comes as a surprise. Law firm trust accounting reports show the aging list on the first page, which supports California IOLTA compliance and CTAPP compliance throughout the year.
For California law firm bookkeeping clients, we keep the check log, age the outstanding list and prepare the follow-up letters for the attorney to send. Irvine law firm bookkeeping support also includes help deciding when to stop payment and reissue.
Orange County attorneys who are carrying old checks can send us their latest reconciliation. We will age the list, suggest a follow-up plan and help you document each step.
Strong IOLTA bookkeeping means no item stays on the list long enough to be forgotten.
Talk with an Irvine law firm bookkeeping specialist
Schedule a consultation to clear your outstanding trust items.
Call or Text: (949) 482-2790 | irvinebookkeeping.com
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