It’s easy to think fraud won’t happen to you – until it does. Fraud occurs in a variety of ways, but it boils down to someone using deception to illegally take someone else’s assets. Trust account fraud is especially concerning for lawyers. Not only are attorneys personally liable for any money that goes missing from a trust account, but they … Read More
What trust accounting records should my law firm be keeping?
Trust account record requirements vary by State Bar, but all records help keep you compliant. Why? Because the funds in a trust account don’t belong to you, but you’re responsible for keeping track of every cent, including interest.[1] Bank Ledger and Records Like a highly detailed bank account statement, this ledger notes the when, how much, and why of all … Read More
What are the most common issues found during trust account audits?
Improper handling of a trust account can lead to an ethics violation, and many states conduct random audits. While some trust accounting issues are the result of a deliberate misuse of funds, many others are mistakes that result from poor record keeping or not understanding the regulations surrounding a trust account’s use. Some of the most common issues are discrepancies … Read More
What happens during an audit of trust accounts?
The possibility of being selected for a random trust account audit can be stressful, but understanding how the process works can alleviate some of the anxiety. Receiving notice. Typically, notices for audits are mailed, and the amount of notice given varies by state. In New Jersey for example, audit notices normally arrive ten days to two weeks before the scheduled … Read More
Should my law firm use retainers or just bill as work is done?
Law firms either bill as work is done (e.g., monthly, quarterly, or at predetermined milestones) or by using a retainer model. The three retainer models most frequently used by law firms are: General retainers Flat fees or advance payment retainers Security retainers General retainers secure a lawyer’s services for a particular period of time, and flat-fee retainers function as complete … Read More
Law Firm Financials: Managing Your Money & Trust Account Compliance (32:37)
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Should an IOLTA account have overdraft protection?
Client trust accounts are special bank accounts used by attorneys to hold deposits paid by clients for future services. These funds can’t be withdrawn from the account until an attorney or law firm’s fees are earned and the client is given an invoice[1]. For cases involving a large dollar amount or where funds will be held for an extended period … Read More
Who can and should be a signatory on a trust account?
Establishing a client trust trust account for your law firm means designating signatories. Signatories are able to sign for account-related tasks such as issuing checks or withdrawals from the account. Before establishing any signatory, consider the significant responsibility entrusted to you with your client trust accounts. Lawyers are obligated to protect the funds and property included in that trust. Any … Read More
What name should my law firm put on trust accounts?
When opening a trust account, what name to put on the account can cause some confusion. Attorneys often wonder what the name should be, especially depending on whether or not the trust account is an IOLTA account with multiple client funds in it or a single client trust account. Should the account name be: The managing partner at the firm … Read More
For trust accounting records, what happens if my bank doesn’t return deposit slips?
As part of proper trust account record keeping, law firms are required to keep copies of deposit slips associated with the account. In the event of an audit, these slips help to create a paper trail to verify what your books say. Without them, an auditor could be left wondering what actually happened with the funds. In some cases, banks … Read More