Negative client ledger balance in a trust account: causes and fixes

A client ledger is negative when more has been paid out for that client than was received for them. Because the trust account is pooled, the shortfall was paid with other clients' money.

Common causes

• Paying a check before the client's deposit cleared — or before it was received at all.
• A deposit or disbursement recorded against the wrong client.
• A bank fee or chargeback taken from the account and charged to a client.
• A typo in an amount.

Fixing it

If it's a posting error, correct the entry. If money really was overpaid, firms typically replace the shortfall with their own funds promptly and document it; some states require reporting. Check your state's rules and, if in doubt, call your bar's ethics or trust accounting hotline.

Finding them

Tiesheet totals every client ledger, lists any that end below zero as a problem, and warns about clients that dipped below zero during the month even if they ended positive. Try the negative balance check.

Last reviewed 2026-10-27. General information, not legal or accounting advice — your state's rules decide how trust accounts must be kept and reconciled.