Which statement about a trust account is true?

• A. It is used as the firm's general operating account
• B. It is a bank account where client funds are deposited and kept separate from operating funds
• C. It is used as a personal savings account by the attorney
• D. It is a public record of client funds

Answer: (B)

A trust account is a bank account used to hold client money separately from the law firm's own funds. The essential point is to prevent commingling of client funds with the firm’s operating money, protecting clients and ensuring accurate accounting. When client funds come in—such as a retainer or money from a settlement—they are deposited into the trust account and recorded in a client ledger tied to each matter. Withdrawals from the trust account are only for client-approved purposes and must be properly allocated to the right matter, with clear documentation of what was earned or charged. This separation keeps client funds secure and auditable, and it reflects the attorney’s fiduciary duty. The firm’s operating account, by contrast, is for paying daily business expenses like payroll and rent, not for holding client money. A personal savings account would not satisfy the fiduciary requirements, and trust accounts are not public records of client funds; they are private accounts subject to regulatory oversight and audits.