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Updated September 2025.
Managing client funds through trust or IOLTA accounts is one of the most critical responsibilities for law firms. Especially for contingency-fee firms, ensuring that disbursements are made accurately, ethically, and securely is essential to maintaining compliance with Bar Association rules and avoiding serious penalties.
We wrote this article to help you navigate the ethics rules and opinions around disbursing client funds electronically.
Bar Associations across the United States have issued rules and guidance to ensure accurate recordkeeping for trust and IOLTA account transactions. One persistent myth, however, is that trust account disbursements must be made by paper check. In reality, no state requires firms to limit disbursements to paper checks, opening the door for more secure, efficient electronic options.
In many states, the rules of professional conduct don’t specify what payment methods can be used for disbursements. Instead, they focus on documentation. Proper recordkeeping is key, including tracking who received the funds, when they were disbursed, and who approved the disbursement. Each disbursement should have a unique identifier and be tied to a specific client/matter.
Certain states, such as New York and Arizona, have gone a step further by issuing guidance specifically addressing electronic disbursements. New York’s guidance even touches on the practice of issuing pre-paid debit cards, which can provide flexibility for unbanked clients.
Most states’ recordkeeping requirements can be boiled down to a few key points:
For additional protection, you may want to add language to your engagement agreement and contingency fee settlement agreement to get explicit consent to disburse money digitally. Sample language is below:
I agree to receive my disbursement digitally. I direct my attorney to allow the firm’s payment processor to receive my funds from the attorney’s client trust account and then disburse the funds to me. If I elect to receive payment digitally, I understand and agree that the firm’s payment processor may deduct a transaction fee of $___ from my settlement proceeds. I agree that this fee is reasonable for the convenience of receiving payment digitally.
Disbursing funds from a trust or IOLTA account doesn’t have to involve writing paper checks. While state rules emphasize accurate recordkeeping, most do not restrict the method of disbursement. What matters is that you document every transaction: who received the funds, who approved the payment, when the trust account was debited, and the unique identifier linking the disbursement to a client or matter.
Some states, like New York and Arizona, have gone further by addressing electronic disbursements directly, but even in jurisdictions without specific guidance, digital disbursements are allowed if you maintain proper records. To add another layer of protection, you can include client consent language in your engagement or settlement agreements.
By combining strong recordkeeping practices with explicit client consent, you can disburse funds electronically in a way that is efficient, secure, and compliant with ethics rules.