California Trust Accounting Defense

Trust accounting issues are among the most aggressively enforced areas of attorney discipline in California. Even technical errors, with no intent to misuse client funds, can trigger audits, investigations by the Office of Chief Trial Counsel, and formal disciplinary charges.

This page provides a high-level framework for understanding trust accounting discipline risk, how the State Bar evaluates violations, and where defense strategy matters most. It is designed for attorneys who have already been contacted by the State Bar, are facing an audit or investigation, or are concerned that a trust accounting issue may lead to discipline.

This information is educational and does not provide guarantees or legal advice for your specific situation.

Why Trust Accounting Violations Are Treated Differently

Trust accounting is not viewed as a clerical obligation. Under California law, it is a core fiduciary duty tied directly to public protection. As a result:

• The State Bar applies strict standards

• Intent is often inferred from financial records

• Poor recordkeeping is treated as a serious violation by itself

• “No client harm” does not eliminate discipline exposure

Many trust accounting cases escalate not because of misuse of funds, but because the attorney cannot prove compliance through required records.

Common Trust Accounting Issues That Trigger Discipline

Trust accounting discipline typically arises from one or more of the following:

Recordkeeping Failures

• No client ledgers

• No monthly three-way reconciliations

• Incomplete or inconsistent journals

• Missing bank statements or deposit records

Commingling

• Paying bank fees from trust

• Leaving earned fees in trust too long

• Depositing personal funds improperly

• Provisional credit issues

Shortages and Misappropriation Allegations

• Negative client balances

• Aggregate shortages

• Unexplained transfers or withdrawals

• Delayed or partial replacement of funds

CTAPP Noncompliance

• Failure to register trust accounts

• Inaccurate self-assessment responses

• Inactive enrollment

• Audit selection based on CTAPP risk factors

Each of these issues carries different discipline exposure, but they are often alleged together.

The State Bar focuses on objective financial evidence, not intent statements.

Key questions include:

• Can the attorney account for every dollar held for every client?

• Do records reconcile monthly without unexplained discrepancies?

• Were client funds ever placed at risk?

• Was compliance proactive or reactive?

• Is there a pattern or an isolated failure?

In many cases, the inability to produce required records becomes the strongest evidence against the attorney, regardless of actual misuse.

What to Do If You Identify a Trust Accounting Issue

Immediate priorities:

• Stop and assess before responding to the State Bar

• Do not alter or backdate records

• Identify whether a shortage exists

• Preserve all financial documentation

• Get guidance before self-reporting or producing records