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How to Prepare for Changes to Your Trust Account: Part 2

In our last post on How to Prepare for Changes to You Trust Account we introduced you how to begin the process of switching your trust funds from one bank to another while staying compliant. Today, we look at some final considerations, such as legal trust accounting software, which can have an effect on keeping your law firm compliant when making changes to the way you manage your account.

Law firms are bound by very different rules and requirements than most other businesses. Their unique operations are guided by various compliance standards and even a simple activity like moving trust bank accounts from one bank to another can quickly become complicated. Trust accounting rules must be strictly followed in order to make sure all money is accounted for and the bookkeeping is properly updated.

With personal or business accounts, moving from one bank to another is often a few transactions and some simple paperwork. However, to protect client funds lawyers must follow a fairly involved process when moving a trust bank account. Each piece of this undertaking is critical, including preparing all necessary records and reports prior to the switch, transferring the funds and closing out accounts.

There is also the matter of software to consider when migrating a trust account, as the books will need to be updated to reflect the change. This update will make sure the transfer of funds to the new bank is documented within the system and will also make sure all future transactions are related to the right account at the new bank. The process followed will depend on a number of factors including:

  • Whether you’ll be keeping your current software or switching to a new legal trust accounting system
  • If your system allows the option to switch the bank assigned to a matter
  • If you are entering new or current clients

When changing a legal trust account to a new bank be aware of the special local requirements law firms must follow. Trust accounting is notorious for the number of potential pitfalls and the possibility of violations and sanctions, so take the time to prepare and plan out a checklist of what will need to be addressed. By putting in the time before and during the transfer the end result will be proper compliance and accurate bookkeeping moving forward.  

For a full guide on How to Maintain Trust Compliance While Switching Banks, click or visit the Trust Accounting section of the CosmoLex Resource Center.

Rick Kabra

Dr. Rick Kabra is President of CosmoLex Cloud, creator of cutting-edge technology solutions to help solo and small law firms law firms. Rick has a Ph.D. in Electrical Engineering from NJIT and has over 10 years of experience in the legal software industry catering to the specialized technology needs of small to mid-sized law firms. Rick has given numerous seminars and published articles on legal technologies such as law practice technology management, cloud computing, and legal billing, business & trust accounting compliance.