What is considered a misappropriation of trust accounting funds?

CosmoLex Team

Every state has their own rules regarding trust accounts, but they all prohibit the misappropriation of client funds. In order to avoid actions that can be interpreted as misappropriation and land you in an ethics violation, and even possibly result in being disbarred, you should be aware of what it constitutes. As an example of how serious the consequences can … Read More

Mastering The Reconciliation Process With Accounting Software & Bank Data Feeds

CosmoLex Team

Most lawyers go to law school because they are interested in practicing law. It is rare that you find a who went to law school because they have a particular affinity for legal accounting. Unfortunately, as a lawyer managing a practice, you must treat your law office accounting as fundamental. The problem is that accounting can be as equally challenging … Read More

Beyond The Basics: Advanced Trust Accounting Challenges for Law Firms

CosmoLex Team

The majority of lawyers know basic trust accounting principles, but throughout the course of business, instances arise that require more in-depth knowledge. Scenarios such as a lawyer leaving the firm and taking their clients with them or the firm needing to switch banks may not be daily occurrences, but it’s still critical that the proper procedures are followed. Going beyond … Read More

As a lawyer, what should I do if I make a trust accounting mistake?

CosmoLex Team

Making a trust accounting mistake can lead to serious repercussions for lawyers, but proper handling is critical in order to avoid sanctions. If there has been a small error, correct the issue as soon as it is noticed. Delays in fixing known errors can be interpreted as failure to properly manage the trust account. For larger concerns, you can reach … Read More

What are my state's IOLTA rules?

CosmoLex Team

Every state has an IOLTA program, but whether or not it is mandatory varies from state to state[1]. Many of the guidelines for IOLTA accounts are standards set by the American Bar Association and are closely followed by state bar associations. There are differences in each state’s rules and statutes, however, as they are allowed to decide when, how, and … Read More

Does a client trust account need to generate interest?

CosmoLex Team

Certain states require that client funds only be placed in accounts that generate interest[1]. Typically trust accounts, whether IOLTA or individual trust accounts generate interest.  The primary difference lies in where the interest goes. With IOLTA accounts, interest goes to a state foundation for the purposes of providing legal aid to those who would not be able to otherwise afford … Read More

How should I record trust deposits?

CosmoLex Team

No matter what type of accounting your firm uses, trust account deposits should be recorded using the principles of double-entry accounting[1]. In double-entry accounting, each transaction is entered twice: once as a credit and once as a debit. Which accounts the transaction is applied to will be determined by how your firm’s chart of accounts is set up. If you’re … Read More

What trust accounting reports should my firm be generating?

CosmoLex Team

Maintaining proper trust accounting records is crucial in order to ensure accurate bookkeeping, provide an audit trail, and clearly establish proper trust account handling to maintain compliance. Also known as IOLTA accounting, managing these specialized client accounts requires diligent reporting. Each state varies in its specific report requirements, but the following are a list of trust account reports that are … Read More