Trust account compliance is one of the most heavily scrutinized areas of practice for North Carolina real estate attorneys. Under Rule 1.15 of the North Carolina State Bar Rules of Professional Conduct, attorneys are required to maintain rigorous documentation, disciplined accounting, and clear separation of funds.

Here are a few ways to avoid trust account missteps and stay ahead of audits or disciplinary inquiries.

Use a Dedicated IOLTA Account for Closings

Every firm handling client funds must maintain an Interest on Lawyer Trust Account (IOLTA) clearly labeled and distinct from the firm’s operating account, per Rule 1.15 of the North Carolina Rules of Professional Conduct.

Key Tip: Include the firm’s name and “Trust Account” in the title. Keep a separate account for each physical office, if needed.

Perform Monthly Three-Way Reconciliation—No Exceptions

One of the most important steps in maintaining a compliant trust account is performing a full three-way reconciliation every single month, including:

• Bank statement balance

• Checkbook or software ledger balance

• Client ledger total

Key Tip: Never disburse if these numbers don’t match. If something is off, stop, investigate, and resolve before moving forward.

Never Disburse Uncollected Funds

One of the most serious (and common) trust account violations is disbursing funds that haven’t actually cleared the bank. Just because a wire is “on the way” or a check has been deposited doesn’t mean the money has cleared and available for use.

Collected funds means verified, irrevocably credited deposits. Until a wire is received and confirmed, or a check fully clears, those funds cannot be used—no matter the pressure to close on time or meet client expectations.

Common violations:

• Paying before a wire hits the account

• Using one client’s deposit to close another file

🔐 Lock this down with a firm policy: No clearance = no disbursement.

Key Tip: Confirm wire receipts and check clearance directly with your bank or online portal—never assume based on a third-party email confirmation.

Maintain Impeccable Documentation

Trust account compliance isn’t just about managing funds correctly—it's about being able to prove that you did. You must be able to produce clear, complete, and organized documentation including:

• Client-specific ledgers

• Deposit and withdrawal records

• Wire confirmations

• Copies of checks and settlement statements

Key Tip: Store and securely back-up all documents digitally, in multiple formats, for six years minimum.

Know What Triggers an Audit

Even if your trust account is well-managed and no wrongdoing is suspected, the NC State Bar may conduct a routine and targeted audit to ensure compliance with trust accounting rules. The NC State Bar may audit your firm for various reasons including:

• Random spot-checks

• Overdrafts or bounced checks

• Missed IOLTA reports

• Complaints from clients or co-counsel

Key Tip: Don’t wait for an audit notice to tighten up your records and systems. A well-documented, proactively managed trust account is your best defense.

Bottom Line: Escrow is more than math—it’s a matter of ethics.

The key to staying compliant is building habits of accountability and adopting clear internal controls.

Have questions about escrow account compliance?

Key Title is your go-to partner for navigating trust accounting requirements across North Carolina. Our experienced team of in-house attorneys understands the rules, the risks, and the systems needed to stay audit-ready. Whether you’re building better internal controls, preparing for an audit, or just need expert guidance, we’re here to help you stay compliant and confident.