Disbursing Funds from a Trust Account

When a matter closes or a settlement is reached, your firm may need to move funds out of a client's trust account — either back to the client (returning unused retainer) or to a third party (paying a lien, vendor, or settlement disbursement). This is different from applying trust to pay a LeanLaw invoice. This guide covers all non-invoice trust disbursements.

📋 Done in QuickBooks Online: Trust disbursements that are not invoice payments must be recorded directly in QuickBooks Online — not in LeanLaw. LeanLaw automatically reflects the updated trust balance after the QuickBooks Online transaction is saved. Make sure you have access to your firm's QuickBooks account before proceeding.

When to Use This Workflow

Scenario	Use This Guide?
Returning unused retainer to a client at matter close	✓ Yes
Paying a lien holder from settlement funds	✓ Yes
Paying a third-party vendor (e.g., expert witness) directly from trust	✓ Yes
Releasing settlement funds to the client after deducting fees	✓ Yes
Paying a LeanLaw invoice from a client's trust balance	✗ No — use Pay from Trust in LeanLaw instead

💡 Pro tip: If you need to pay a reimbursable expense (like a filing fee) and are considering writing a check directly from trust — don't. Enter the expense in LeanLaw first and apply trust to the invoice instead. That way the expense is properly tracked, billed, and reflected on the client's account statement automatically.

Step-by-Step: Recording a Trust Disbursement in QuickBooks

In QuickBooks Online, click the + New button in the top left.
Select Check from the Vendors column.
Fill out the check as follows:

Check Field Reference

Field	What to Enter
Payee	Who the check is being paid to: • Client's name — when returning unused retainer or releasing settlement funds to the client. • Vendor name — when paying a lien holder, third-party expert, or other external payee.
Bank Account	Your firm's IOLTA / Trust bank account. If your firm has multiple trust accounts, make sure to select the one holding this client's funds.
Category	The client's (or matter's) trust liability sub-account — typically called 'Funds Held in Trust: [Client Name]' or 'Funds Held in Trust: [Matter Name]'. • Client accounting: select the client-level liability account. • Matter accounting: select the specific matter's sub-account. Using the wrong sub-account will reduce the wrong client's trust balance.
Description	A brief note describing the disbursement (e.g., 'Return of unused retainer — matter closed' or 'Payment to ABC Liens per settlement agreement').
Amount	The disbursement amount. Verify this against the client's current trust balance in LeanLaw before entering — the disbursement cannot exceed the available trust balance.

Click Save and Close (or Save and New if recording multiple disbursements in one session).
Return to LeanLaw and refresh. The client's trust balance will update to reflect the disbursement.

⚠️ Physical transfer still required: Recording the check in QuickBooks Online handles the accounting entry — it does not physically move money. You still need to issue the actual check or initiate the bank transfer separately. The QuickBooks Online check records the obligation; your bank fulfills it.

Verifying the Balance Updated in LeanLaw

After saving the QuickBooks Online check, confirm the disbursement is reflected in LeanLaw:

Go to Billing → Trust Account tab.
Click the client's record.
Verify the trust balance has decreased by the disbursement amount.
The transaction should appear in the client's transaction history.

📋 If the balance hasn't updated: Refresh LeanLaw. If the balance still doesn't reflect the change after a few minutes, verify that the QuickBooks Online check was saved correctly — specifically that the Bank Account is your IOLTA account and the Category is the correct trust liability sub-account.

Common Scenarios in Detail

Scenario 1: Returning Unused Retainer to a Client

At matter close, your client has $500 remaining in trust that should be returned:

Payee: The client's name.
Bank Account: Your IOLTA account.
Category: The client's (or matter's) Funds Held in Trust liability account.
Amount: $500.
Description: 'Return of unused retainer — [Matter Name] closed [Date].'

📋 After the return: Send the client an updated account statement showing the trust disbursement and zero balance. Generate this from QuickBooks Online (Sales → Customers → Create Statement) or from the trust ledger in LeanLaw.

Scenario 2: Paying a Lien from Settlement Funds

A personal injury settlement has been deposited to trust. Before distributing to the client, a medical lien must be paid:

Payee: The lien holder's name (as it appears in your QuickBooks Online vendor list, or add them as a new vendor).
Bank Account: Your IOLTA account.
Category: The client's (or matter's) Funds Held in Trust liability account.
Amount: The lien amount.
Description: 'Lien payment — [Lien Holder] — [Matter Name].'

Scenario 3: Paying a Third-Party Vendor from Trust

An expert witness fee must be paid directly from the client's trust account per the engagement agreement:

Payee: The expert witness or vendor name.
Bank Account: Your IOLTA account.
Category: The client's (or matter's) Funds Held in Trust liability account.
Amount: The vendor fee.
Description: 'Expert witness fee — [Expert Name] — [Matter Name].'

⚠️ Trust compliance reminder: All disbursements from trust must be for legitimate client expenses and properly authorized. Maintain documentation (invoices, settlement agreements, client authorization) for every trust disbursement for state bar audit purposes.

Multiple Trust Accounts

If your firm maintains separate IOLTA accounts (e.g., one per partner, or one for a specific matter type), always verify which trust account holds the client's funds before recording the disbursement. Selecting the wrong Bank Account in QuickBooks Online will debit the wrong trust account and create a discrepancy in your three-way reconciliation.