A lawyer receiving money for a client needs to know whose money it is, why it was received, what has been spent, and what remains due. Trust-account discipline begins with those questions. It should not depend on a partner remembering which portion of a bank balance belongs to whom.
Former Rule 16.01 is a familiar search term, but the CPRA replaced the former Code of Professional Responsibility. Canon III, Sections 49 and 50 address accounting and keeping client funds separate. Build the office procedure around the current framework rather than reproducing a US IOLTA checklist.
Classify money when it arrives
Do not resolve an unidentified payment by placing it against the oldest invoice. Keep it in a review queue until the entitlement and allocation are established. The label in a payment message may be incomplete or wrong.
| Receipt | Question before posting |
|---|---|
| Payment of an earned fee | Which invoice or earned charge does it settle? |
| Advance for future work | What does the agreement and applicable law require for holding and application? |
| Filing or expense advance | Which client purpose and authorized disbursements does it fund? |
| Settlement proceeds | Who is entitled to the money and what instructions govern distribution? |
| Unidentified transfer | Who paid, for which matter, and for what purpose? |
Maintain a ledger for every client purpose
Use a client-and-matter ledger recording date, reference, amount received, purpose, authorized payment, supporting record, and running balance. The ledger should let a reviewer reconstruct a balance without reading an entire chat history.
Keep client money distinct from the firm’s operating funds and maintain records showing each entitlement. Discuss the appropriate banking arrangement with the bank and accountant. A software balance is a record; it does not establish that funds are actually segregated in the bank.
Approve disbursements before releasing money
A useful control is for the requester to identify the purpose and supporting document, while a separate authorized person approves release. After payment, attach the bank evidence and record the recipient. Decide how small offices will handle a second-person review without inventing approvals after the event.
For example, if a client provides ₱20,000 for expenses and an authorized ₱3,500 payment is made, the ledger balance is ₱16,500 before other valid transactions. The arithmetic alone does not show whether the expenditure was permitted; keep the instruction and underlying proof.
Reconcile bank, control balance, and client ledgers
At a regular close, compare the actual bank statement, the control record, and the sum of individual client balances. List timing differences separately from errors. A reconciling item should have an explanation, owner, and resolution date.
Investigate negative client balances and unexplained transfers promptly. Do not use one client’s available funds to conceal another matter’s shortfall. Keep the reconciliation and reviewer sign-off with the underlying records.
Send an account the client can understand
At matter closure, reconcile outstanding disbursements and arrange the proper return or disposition of remaining funds. Preserve the final accounting. Do not describe a US trust-account rule as Philippine law merely because foreign software uses that terminology.
- •Opening balance and period covered.
- •Receipts with dates and purposes.
- •Disbursements with references and explanations.
- •Any properly authorized application to fees.
- •Closing balance and proposed next action.
- •Supporting documents or a practical way to obtain them.
Frequently asked questions
Is Rule 16.01 still the current citation?
It is a historical reference under the former CPR. Consult the CPRA, including Canon III’s accounting and separation provisions, for the current framework.
Does a trust-account feature prove compliant handling?
No. The bank arrangement, actual movement of money, instructions, supporting records, and lawyer’s conduct all matter.
Try DueCounsel Free
Built for Philippine law firms. Free migration, onboarding, and training.
Start Free