Washington IOLTA Compliance: Trust Account Rules & Requirements

RPC 1.15A is the foundational rule governing general trust account conduct. It establishes the attorney's duty to hold client funds separately from firm funds, maintain complete and accurate records of all trust account transactions, and disburse client property promptly and only when the client is entitled to it. Under RPC 1.15A, every client matter requires its own separately identified ledger, and a running balance must be maintained on all trust account records — including the general trust ledger and every individual client matter ledger. This running-balance requirement is Washington-specific and goes beyond what most states require.

RPC 1.15B governs the IOLTA mechanics: the account must be at an Approved Eligible Institution, interest goes to the Legal Foundation of Washington, and the account must be designated as an IOLTA account with the institution. ELC 15.4 adds the enforcement dimension: it requires Approved Eligible Institutions to report any overdraft in an IOLTA account to the WSBA regardless of whether the overdraft was honored, and it establishes the mechanism for bar discipline when trust accounting rules are violated. Together, these three authorities create Washington's comprehensive trust accounting framework.

Washington requires monthly three-way reconciliation of every IOLTA trust account under RPC 1.15A. Three-way reconciliation means verifying, as of the same calendar date, that the bank statement balance, the trust account general ledger balance, and the sum of all individual client matter ledger balances agree exactly. Any discrepancy must be identified and corrected before disbursements proceed.

What makes Washington's reconciliation requirement more demanding than most states is the running-balance rule. Under RPC 1.15A, a running balance must be maintained on both the trust account general ledger and on every individual client matter ledger — not just a balance as of each reconciliation date. Running balances mean that every entry in the ledger shows the account balance immediately after that transaction is posted, creating a continuous record of the account's state at every point in time. This requirement is particularly demanding for PI firms processing high volumes of settlement receipts, lien payments, and attorney fee disbursements, because each transaction line must update the running balance and that balance must remain accurate throughout the month.

Washington imposes a seven-year retention requirement on all IOLTA trust account records — one of the longest in the country and the most demanding in the Pacific Northwest. The seven-year window applies to every record: bank statements, cancelled checks and wire confirmations, client matter ledgers with running balances, the general trust ledger, all monthly reconciliation reports, disbursement authorizations, and closing statements.

For PI firms in Washington, seven years of records for active and concluded matters creates a substantial data management obligation. A firm closing 50 matters per year needs accessible, retrievable records for 350 matters at any given time. The WSBA does not provide extended notice before requesting specific matter records during a compliance review — firms are expected to be able to produce requested documents promptly. The running-balance requirement compounds this: the records must not only exist for seven years but must show the correct running balance for every transaction in that period.

ELC 15.4 requires Approved Eligible Institutions to report any overdraft in a Washington IOLTA trust account to the WSBA, whether or not the overdraft was honored. Upon receiving an overdraft notification, the WSBA initiates a review and contacts the attorney for documentation of the cause, the resolution, and any impact on client funds. The WSBA's ability to proceed from an overdraft notification to formal discipline is well established — Washington has one of the more active attorney discipline systems in the country, and trust accounting violations are taken seriously.

The most common cause of overdrafts in Washington PI practices is disbursing against a settlement check that has been posted to the account but has not yet cleared at the issuing bank. Washington firms must wait for actual clearance — confirmed available funds — before disbursing any portion of a deposited settlement. The distinction between a posted credit and an actually cleared credit is critical, and PI firms that process large checks regularly must build this distinction into their disbursement workflow.

Under RPC 1.15B and ELC 15.4, Washington IOLTA accounts must be held at institutions on the Legal Foundation of Washington's Approved Eligible Institutions list. These institutions have executed the required overdraft notification agreement with the WSBA and are authorized to receive Washington IOLTA deposits. The Legal Foundation maintains the current list at legalfoundation.org.

Firms opening new IOLTA accounts or changing banking relationships must verify the institution's current approved status before transferring client funds. National banks with Washington branches typically participate in the state's IOLTA program, but participation is institution-specific. Using a non-approved institution is a substantive violation of RPC 1.15B — not a minor technical error — and the WSBA treats it as such. Firms that discover a compliance gap in their institution's approved status should transfer to an approved institution promptly and consider proactive disclosure to the WSBA.

Washington State Bar disciplinary proceedings against PI firms reveal three patterns that account for the majority of IOLTA violations. First, failure to maintain running balances on trust account records. Many firms that have managed trust accounts for years under systems designed for other states' requirements do not generate running balances with each transaction. Washington's RPC 1.15A requires it, and a trust ledger that only shows periodic balances — at reconciliation dates, for example — does not satisfy the rule.

Second, failure to retain records for the full seven-year period. Seven years is longer than most attorneys expect, and firms that apply the five-year standard common in other states inadvertently destroy records that Washington requires to be preserved. Third, the complexity of the dual-rule structure causes some firms to satisfy one rule while inadvertently overlooking requirements under the other. RPC 1.15A and RPC 1.15B cover different terrain, and compliance with the general trust accounting rule does not automatically produce compliance with the IOLTA-specific mechanics of RPC 1.15B.

Disbo's trust accounting engine addresses Washington's specific three-authority compliance framework — RPC 1.15A, RPC 1.15B, and ELC 15.4 — through a combination of automated recordkeeping, real-time reconciliation, and disbursement controls. The platform maintains a separate digital ledger for every client matter, and every transaction automatically updates the running balance for that matter's ledger and for the trust account general ledger — satisfying RPC 1.15A's running-balance requirement without manual intervention.

Monthly three-way reconciliation runs continuously: Disbo compares the bank balance, the trust ledger total, and the sum of all client matter running balances at every transaction, surfacing discrepancies immediately. All records — ledgers with running balances, reconciliation reports, bank statements, and disbursement documentation — are retained automatically for Washington's seven-year period and organized by matter for rapid retrieval. Disbursements are blocked when the cleared balance in a client matter ledger is insufficient, preventing the most common cause of overdrafts. When the WSBA requests records, a firm on Disbo can produce the complete audit package in under a minute.

Interest earned on Washington IOLTA accounts flows to the Legal Foundation of Washington (legalfoundation.org), which distributes the proceeds to civil legal aid organizations throughout the state. The Foundation administers Washington's IOLTA program independently, maintaining the Approved Eligible Institutions list and working with the Washington State Bar Association on compliance matters under ELC 15.4.

For Washington attorneys, the IOLTA program structure means that Approved Eligible Institutions have committed to three specific obligations: calculating IOLTA interest correctly and remitting it to the Foundation on the required schedule, applying the legal rate of return required under Washington's rules, and reporting any trust account overdraft to the WSBA. Attorneys should verify their institution's current Approved Eligible Institution status at legalfoundation.org whenever opening a new IOLTA account or changing banking relationships.

Q: What specifically does the 'running balance' requirement mean under Washington RPC 1.15A?

Every entry in both the trust account general ledger and every client matter ledger must show the account balance immediately after that transaction is recorded — not just at reconciliation. Every deposit, disbursement, and fee entry must update the running balance on the same line, creating a continuous real-time record of the account's state.

Q: When does Washington's seven-year retention clock start?

From the conclusion of the representation — not from the date of the individual transactions. A matter that closes after four years of active litigation triggers a seven-year clock from the closing date.

Review these items at least quarterly to maintain Washington trust accounting compliance under RPC 1.15A, 1.15B, and ELC 15.4.

Account: IOLTA account at an Approved Eligible Institution (verify at legalfoundation.org), properly designated, with active ELC 15.4 overdraft notification.

Ledgers: Every active matter has its own separately identified client ledger with a running balance updated at every transaction. The trust account general ledger also maintains a running balance — both required under RPC 1.15A.

Reconciliation: Monthly three-way reconciliation documented for every month within the seven-year retention period. Bank balance, general ledger running balance, and sum of client matter ledgers agree in every report.

Retention: Records for all concluded matters within the past seven years preserved by matter. Washington's seven-year period runs from the conclusion of the representation.

Disbursements: Confirmed cleared funds required before any payment is initiated.