Settlement Distribution Statement / Closing Statement

Document Purpose and Fiduciary Obligations

You are preparing a Settlement Distribution Statement that serves as both a comprehensive financial accounting and a permanent legal record of how settlement proceeds were distributed to conclude a client's legal matter. This document fulfills critical ethical obligations under the applicable Rules of Professional Conduct governing client property, trust accounting, and fee transparency. The statement must provide complete clarity regarding every dollar of the settlement, from the gross amount received through all deductions to the final net payment delivered to the client. This document will serve multiple purposes: it provides the client with information necessary for tax reporting and financial planning, creates a permanent record of the case resolution, and may be subject to review by courts, auditors, state bar authorities, or other regulatory bodies. Given these multiple audiences and purposes, absolute accuracy and meticulous attention to detail are essential.

Gathering and Validating Source Information

Before drafting the statement, you must locate and review all source documents that contain the financial information necessary for a complete and accurate accounting. Search the matter documents to find the fully executed Settlement Agreement, which should bear all required signatures and clearly state the gross settlement amount. Locate the complete Attorney Fee and Cost Ledger or equivalent accounting records that document every expense incurred throughout the litigation, including filing fees, deposition costs, expert witness fees, medical record retrieval charges, court reporter expenses, investigation costs, and any other case-related expenditures advanced on behalf of the client. Find the Lien Resolution Summary or equivalent documentation that identifies every medical provider lien, Medicare or Medicaid claim, health insurance subrogation interest, hospital lien, and any other encumbrance against the settlement proceeds, along with the negotiated resolution amount for each. If the client has provided specific written instructions regarding payment delivery method or has requested that funds be distributed in a particular manner, locate and review those instructions as well.

Once you have identified these source documents, extract the critical financial data with precision. From the Settlement Agreement, capture the exact gross settlement amount as stated, noting any specific allocation between different claims or damage categories if applicable. From the fee and cost records, extract the total attorney's fees calculated according to the fee agreement terms, whether based on a contingency percentage, hourly billing, or a hybrid arrangement, and compile a complete list of all litigation costs with dates, vendors, and amounts. From the lien documentation, create a comprehensive list of each lienholder including their full legal name, the original amount claimed, the negotiated settlement amount, and the specific payment instructions or payee information for each. As you extract this information, cross-reference each figure against its source document to ensure accuracy, and verify that all settlement funds have actually cleared and are available in the firm's trust account before proceeding with the statement preparation.

Performing Calculations and Reconciliation

With all source data validated, proceed to calculate the total deductions from the gross settlement amount. Sum the attorney's fees as specified in the fee agreement, ensuring that any contingency percentage is applied correctly and that any fee caps, sliding scales, or special provisions in the fee agreement are honored. Add all litigation costs from your compiled list, double-checking that each expense was legitimately case-related and properly documented. Include all lienholder payments at their negotiated amounts, ensuring that no lien has been overlooked or omitted. If there are any other contractual withholdings such as referral fees to co-counsel, case funding repayments, or other agreed-upon deductions, include those as well. Calculate the net amount payable to the client by subtracting the total of all deductions from the gross settlement amount.

Perform a critical reconciliation to ensure mathematical accuracy and completeness. The sum of all deductions plus the net client payment must equal the gross settlement amount exactly, down to the penny. Any discrepancy, regardless of how small, indicates an error that must be identified and corrected before the statement can be finalized. This reconciliation serves as your primary quality control mechanism and ensures that you can account for every dollar of the settlement proceeds. Document your reconciliation calculations separately so that if questions arise later, you can demonstrate how you verified the accuracy of the statement.

Structuring the Statement with Clarity and Professionalism

Draft the statement as a formal business letter on firm letterhead, addressed to the client using their full legal name and current mailing address as it appears in the case file. Open with a professional yet warm paragraph that acknowledges the successful resolution of the case, congratulates the client on the outcome, and expresses appreciation for their trust and confidence throughout the representation. This opening sets a positive tone while transitioning into the financial accounting that follows.

In the body of the statement, provide a clear narrative explanation that this document serves as a complete accounting of all settlement proceeds and demonstrates how the funds were distributed among the various parties entitled to payment. Explain that the statement shows the gross amount received, itemizes all deductions, and calculates the net amount that will be paid to the client. Present the financial breakdown in a professionally formatted table that guides the reader logically through the distribution. Begin with the gross settlement amount as the top line, clearly labeled and prominently displayed. Then list each category of deduction as a separate line item: Attorney's Fees with a reference to the fee agreement percentage or rate applied, Litigation Costs either as a single line with a detailed breakdown attached or as individual line items if the list is not excessively long, and each lienholder payment listed separately by the lienholder's name and type of lien. Show subtotals for major categories to help the reader understand the composition of deductions, and conclude with the net amount payable to the client as the final line, displayed in bold or otherwise highlighted to draw attention to this critical figure.

For each line item, include not only the dollar amount but also brief descriptive information that provides context. For attorney's fees, reference the specific provision of the fee agreement that governs the calculation. For significant litigation costs, provide enough detail that the client can understand what the expense represents. For lienholder payments, identify the provider or entity and the type of claim being satisfied. This level of detail demonstrates transparency and helps the client understand exactly how their settlement was allocated.

Providing Supporting Documentation and Payment Information

Attach comprehensive supporting documentation as annexes to the statement to provide the client with a complete record and to substantiate every figure in the main statement. Include a detailed breakdown of litigation costs that lists each expense chronologically or by category, showing the date incurred, the vendor or payee, a description of the service or item, and the amount paid. Attach copies of lien satisfaction letters, releases, or settlement agreements from each lienholder that confirm their acceptance of the negotiated payment amount and their agreement to release their claim against the client. Include relevant excerpts from the fee agreement that show the fee calculation methodology, particularly the contingency percentage or hourly rate provisions that were applied in calculating the attorney's fees shown in the statement.

Provide clear information about how and when the client will receive their net settlement payment. If a check is being issued, specify the check number, the issue date, the bank on which it is drawn, and the expected delivery method and timeframe. If funds will be delivered by wire transfer, provide the wire confirmation number, the expected deposit date, and confirmation of the account to which funds will be sent. If the client has requested that their payment be split among multiple recipients or delivered in a specific manner, confirm that these instructions will be followed and provide details about each payment.

Conducting Quality Assurance and Compliance Review

Before finalizing the statement, conduct a comprehensive quality review that addresses multiple dimensions of accuracy and compliance. Begin by independently recalculating all totals to verify that your arithmetic is correct and that the reconciliation balances perfectly. Review the statement against the Lien Resolution Summary to confirm that every lien identified has a corresponding payment line in the statement and that no liens have been overlooked or omitted, as failing to satisfy a lien could expose the client to future liability. Compare the attorney's fee amount against the fee agreement terms to verify that the percentage or rate applied is exactly as contracted, that the fee was calculated on the appropriate base amount as specified in the agreement, and that any fee caps, maximum amounts, or special provisions have been properly honored.

Review the statement format to ensure it complies with firm standards regarding professional appearance, including appropriate fonts, margins, logo placement, and overall document design. Verify that all required information is present and complete, that there are no placeholder text or bracketed instructions remaining in the document, and that there are no typographical errors, formatting inconsistencies, or other issues that would undermine the document's professional quality and credibility. Consider whether the statement would be clear and understandable to a client who may not be familiar with legal or accounting terminology, and revise any language that could be confusing or ambiguous.

Obtaining Approval and Executing the Final Statement

Route the completed draft statement to the supervising attorney who handled the case for substantive review of all financial calculations, verification of legal accuracy, and confirmation that the statement properly reflects the settlement terms and fee agreement. Simultaneously provide a copy to the firm's accounting manager, bookkeeper, or trust account administrator for independent verification of trust accounting compliance and mathematical accuracy. This dual review process ensures that both the legal and accounting dimensions of the statement have been validated by appropriate personnel. Address any questions, corrections, or revisions identified during this review process, making necessary changes and re-submitting for approval if significant modifications are required.

Once both reviewers have approved the statement and confirmed that it is accurate and complete, prepare the final version for execution. Apply the electronic signatures of all authorized signatories as required by firm policy, which typically includes the responsible attorney and may also require a firm principal, managing partner, or other designated signatory. Ensure that your electronic signature process captures and embeds signature timestamps and authentication certificates within the document to create a verifiable record of who signed the statement and when.

Securing, Distributing, and Archiving the Statement

Generate the final statement as a secured PDF document with appropriate password protection or encryption to prevent unauthorized alterations while in transit or storage. Communicate the password to the client through a separate secure channel, such as a phone call or text message, rather than including it in the same email that contains the document. Embed appropriate metadata in the PDF including the document creation date, author information, matter number, and version control identifiers to facilitate document management and retrieval.

Distribute the statement to the client by sending the secured PDF to their email address of record, accompanied by a professional cover message that explains the attached statement provides the final accounting of their settlement proceeds and that their net payment will be delivered separately according to their specified instructions. If the client has indicated a preference for receiving documents by postal mail or through a client portal, honor that preference and deliver the statement accordingly. Upload the executed statement to the case file in the firm's case management system, ensuring it is properly indexed with appropriate metadata tags so it can be easily located and retrieved. Archive a copy in the firm's document management repository with retention tags that reflect the applicable statute of limitations plus any additional retention period required by professional responsibility rules and firm policy, as settlement distribution statements are critical financial records that must be preserved for extended periods. Maintain an audit log that records all access to the document, including who viewed or downloaded it and when, to ensure compliance with client confidentiality obligations and to provide a complete chain of custody for this important financial record.