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
How do I set up a trust account?
If you will be handling client funds that need to be kept in a trust account, you want to make sure you set up the account properly. Not only are there numerous regulations as to how the account should be maintained, but there are also rules on what banks can be used and how the accounts should be created. Many … Read More
What client trust funds can be used to pay an invoice?
When you’ve worked on a matter and are billing fees to a client, those fees can then be deducted from the client’s trust account. You can also look to seek payment on an invoice for reimbursement of advanced matter costs. However, it is recommended to have the client view and approve the invoice prior to moving the funds[1]. With trust … Read More
What trust accounting reports should my firm be generating?
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
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
How do I maintain trust account compliance?
In order to maintain trust account compliance, be prepared for an audit[1] and avoid sanctions, firms need to adhere to a number of requirements. At all times, lawyers should keep in mind they are acting as fiduciaries for trust funds belonging entirely to their client and that no trust accounts funds are the property of the firm. Record-keeping and reporting … Read More
When can I transfer earned fees from a trust account?
Earned fees should promptly be moved to the firm’s operating account from the client trust account[1]. The trust account is meant for funds that belong to the client only, and once the fees are earned, they are no longer the property of the client. To avoid commingling, those funds need to be transferred to the operating account. The best practice … Read More
Can I use a general accounting program like QuickBooks for Legal Trust Accounting?
General accounting programs can be used to track trust accounts but be aware that they have three major deficits when it comes to legal trust accounting: they require significant customization, they lack necessary safeguards, and their reporting functions are inadequate.[1] Customization Client trust funds have to be recorded on your law firm’s books as a deposit into a bank account … Read More