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
How do you close a law firm trust account?
Law firms close trust accounts for a number of reasons: switching banks, transferring to new partners or closing down a practice are just a few. Whatever the reason, there are certain steps[1] that should be completed to stay in compliance during the process. Fully reconcile the trust account All funds in the account should be tied to a specific matter … Read More
Mastering The Reconciliation Process With Accounting Software & Bank Data Feeds
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
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?
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
How should I record trust deposits?
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 are my state's IOLTA rules?
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
What are the benefits of having a retainer?
Requiring a retainer for your clients to get a financial commitment on their end presents a number of advantages, including: Maintaining cash flow For law firms, consistent cash flow allows you to plan for covering costs associated with payroll and traditional business expenses such as copiers, leases and equipment. Sending out invoices takes time, but waiting for the payment to … Read More
Does a client trust account need to generate interest?
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
What types of funds should and shouldn't be in trust accounts?
Trust accounts, also known as IOLTA accounts, are used for the purpose of protecting client property. To manage them properly and stay compliant, firms need to avoid the commingling of firm and client funds. At all times, any monies belonging to a client and not the firm should be in a trust account. Any client funds should always be deposited … Read More