It’s common practice for law firms to require clients to pay an advanced fee deposit or security deposit retainer before commencing legal work for the client. Holding a deposit sum in trust for the client helps law firms know they will get paid when it comes time to bill for the work they’ve done. While it doesn’t always happen, it’s … Read More
How Can Lawyers Avoid Unintentionally Misappropriating Client Funds?
Misappropriating client funds can have severe repercussions, no matter which jurisdiction you practice in. Although every jurisdiction has its own rules around trust funds, the bottom line is always the same—money in a client’s trust account doesn’t belong to the lawyer until they’ve done the work and billed for it. But what, exactly, counts as misappropriating client funds? Bad apples … Read More
4 Common Trust Accounting Errors and How to Avoid Them
Trust accounts allow lawyers to charge retainer fees, giving them peace of mind that clients can pay their bills—and as such, most lawyers will use trust accounts at some point in their careers. Yet even though trust accounts are commonly used, adhering to all the proper bookkeeping protocols is a complex process, rife with compliance pitfalls. Moreover, errors in trust … Read More
What Do Lawyers Need to Know about Accounting and Client Funds?
Unlike many other business owners, lawyers need to understand two types of accounting: business accounting and legal accounting. Although legal and business accounting certainly overlaps, there are critical distinctions as well—particularly when it comes to handling client funds. Different types of law firm accounting First, it’s important to understand the differences between business and legal accounting, as well as the … Read More
What Every Lawyer Should Know about Disbursing Funds
You’ve just won a settlement for a client. Bravo! The funds from the settlement have been deposited into the client’s trust account, and the client is eager to receive their money. As soon as the funds show up as “available” in the bank feed, you cut your happy client a check—hold up. Not so fast. Just because the deposited funds … Read More
What Every Lawyer Should Know About Operating and Trust Accounts
No matter how large or small, almost every law firm needs an operating account and a client trust account. But despite how common it is to need both types of accounts, not every lawyer understands the important differences between them—a mistake with major implications. Below, we’ll break down how to keep it all straight, avoid common pitfalls, and even run … Read More
Should I Deposit a Retainer into an Operating Account or a Trust Account?
Retainers vary across practice area, purpose, and locality—they don’t all operate in the same way. In fact, as retainers vary, so do the ethical requirements for how a law firm should handle them. While it’s common to think that every retainer should automatically be deposited in a trust account, the reality is more nuanced. So, should you deposit that retainer … Read More
How to Keep Your Three-Way Reconciliation Accurate and Efficient
Most lawyers will handle a client trust account at some point in their careers. Settlement funds (ex: personal injury), retainers, third-party funds, or judgment funds all use client trust accounts. In particular, the retainers that go into client trust accounts help ensure a law firm gets paid in a timely fashion for the work they do. Anyone who’s ever faced … Read More
Retainer Agreements v. Flat Fees: Which Is Right for Your Law Firm?
Whenever a lawyer takes on a new client or matter, they have several options for how to bill. Yet each billing method comes with its advantages and drawbacks—meaning that the right approach varies by practice area and matter type. Below, we break down the different types of retainer fees, flat fees, and important factors to consider when deciding how to … Read More
Trust Account Balance Sheets: Understanding Liability and Equity
As the owner of a law firm, it’s your responsibility to keep up with monthly reconciliation and financial recordkeeping. Even if you have an accountant, you need to review your firm’s numbers so that you have first-hand knowledge of how the firm is doing. But since you have a degree in law, not accounting, there are a few things that … Read More