How Long Can a Lawyer Hold Settlement Money in Trust? A complete guide

A lawyer will hold settlement money in trust for their clients.

This ensures that the funds are kept safe and separate from the attorney’s law firm’s operating funds.

Therefore, the act of holding money for a client by a lawyer creates a trust, and resultantly the lawyer becomes the trustee.

As a trustee, an attorney has a fiduciary duty to act in the client’s best interests and manage the trust prudently and carefully. 

The account where the lawyer holds such monies is a Client Trust Account (CTA).

In this article, we will explore the concept of attorneys holding money in trust,

Furthermore, the article discusses related topics such as factors that affect a claimant’s access to settlement funds.

What is the meaning of trust money?

In law, trust money refers to funds held by someone on behalf of another person.

This money is put in a trust account, which is separate from the personal or business account of the person holding the money.

A trust account is identical to an escrow account,

An escrow is an account where an owner deposits funds with a third party as repayment or deposit for a specific purpose, such as payment for mortgage insurance.

What is an example of trust money?

Examples of trust money include rent deposits, sales deposits, holiday and accommodation deposits

In addition, money received from a settlement claim i.e., settlement funds are also trust money.

Therefore, such monies will always be deposited directly into a law firm’s trust account. 

What is the purpose of a client trust account?

Client Trust Account means a separate account that is created by a licensed attorney to hold client or third-party funds.

As a trustee, it is illegal to use the funds held in a Client’s Trust Account for personal reasons.

Hence, the purpose of the Client Trust Account is to ensure that clients’ money remains out of reach and seizure from a law firm’s creditors or the personal financial problems of an attorney.

Once a settlement agreement is reached by the attorney, then as a trustee, the attorney can make payments to the client or a third party via the Client Trust Account.

How long does it take to reach a settlement?

The time for settlement varies according to the claims being sought.

In cases that involve the health of a person, such as personal injury claims, the settlement negotiations will begin once a doctor certifies that a patient has achieved the “maximum medical improvement.

Delays in the settlement are usually affected by factors such as:

  • The litigation process. A litigation process may take longer than mediation or arbitration.
  • Difficulty in obtaining testimony from witnesses.
  • Difficulty in obtaining medical documentation.
  • Backlog of cases in a law firm or court of law.

After settlement is complete, the funds will be deposited by the person owing the claimant in a trust account.

How long can a lawyer hold money in trust?

How Long Can a Lawyer Hold Settlement Money in Trust
Demanding settlement money from the attorney. Image from Canva

It will take up to 6 weeks for someone to access settlement money that is held in trust by a lawyer.

Several factors lead to this delay

Order of settlement. 

An order of settlement usually occurs whereby an attorney opts for an out-of-court settlement. 

Consequently, a court has to be informed of where parties agree to settle matters without further pursuing litigation.

Upon such notice, the court will then issue an Order of Settlement. 

For this step, the court requires both parties to complete a settlement agreement and release of liability to close the litigation entirely.

The signing of the settlement agreement. 

A settlement agreement is a legally binding contract that is signed between a claimant and the opposing party. 

This agreement contains details such as the settlement amount and a clause that prevents the claimant from seeking additional compensation from the opposing party.

Opposing party and insurance company review. 

This process includes a review from the former and latter parties to ensure compliance and note any discrepancies.

Cutting the cheque. 

Once the settlement agreement is ready, complete, signed, and processed with an insurance company.

A cheque for the agreed amount will be presented for collection by the attorney.

The lawyer must deposit the settlement funds into the Client’s Trust Account.

Once an attorney has calculated the legal costs and paid the fees from the Client’s Trust Account, then the settlement funds are processed into the client’s account.

Note that, once a settlement is reached, the victim’s final compensation payout is subject to deductions.

Some possible deductions include the attorney fees or other costs which the law firm used in following up a settlement claim.

In car accident claims, these costs may include medical bills, medical insurance costs, and any related auto insurance costs,

What happens if a claimant dies before the funds in the trust are distributed?

If a claimant dies before receiving their share under the terms of a trust several things may happen depending on state and federal laws.

Usually, the heirs and estate of the deceased will receive the settlement funds.

Where no heir is apparent, then the assets will remain unclaimed.


In conclusion, lawyers hold money in trust for their clients through client trust accounts.

The trust account serves the important purpose of protecting the client of the interest.

Trustees are obligated by the law to follow instructions according to the document which established the trust.

However, a common practice is the trustee or lawyer cannot utilize money in the trust account for personal use.

The time it takes to settle can vary depending on several factors.