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
What Lawyers Need to Know about Trust Accounts
Almost every lawyer will handle a client trust account at least once in their career. Trust accounts operate according to very specific regulations, and even if you live and breathe them every day, it can still be a lot to keep track of. Never mind if it’s your first time handling a trust account or you haven’t touched one for … Read More
How Should Lawyers Explain Trust Accounting to Clients?
Trust accounts function very differently from other businesses’ client accounts and reflect the unique level of responsibility and trust in the lawyer-client relationship. It’s a good practice to help your clients understand what’s happening with their money in the first place, but if you can successfully explain trust accounts and why they’re different, that can add to clients’ appreciation for … Read More
What is the right process for taking money out of a trust account?
Trust accounts are client money held in trust by a lawyer or law firm. Even though the money isn’t being held in a bank account that the client has access to, it’s still the client’s money—and must be treated that way. Types of trust accounts The money in a trust account belongs to the client, including the interest. But in … Read More