As a law firm grows, a lawyer’s ability to handle all of the tasks that go along with it becomes increasingly difficult. At a certain point, you may need to bring on others to help with things like billing, accounting and client trust accounts. But who can actually access those accounts? What the rules say Having a bookkeeper or paralegal … Read More
When should our law firm create an individual trust account?
Client trust accounts are common for law firms. But how do you know when a client should have their own individual trust account rather than keeping all client funds in a single trust account? With a typical Interest of Lawyers Trust Account (IOLTA), all the funds of clients are kept in a single trust account. Each of those clients and … Read More
How can I do a three-way reconciliation?
For law firms, conducting regular three-way reconciliations[1] is not an option if they handle trust. Bar associations require these reconciliations as a way to verify that lawyers are fulfilling their fiduciary responsibilities and recording and tracking client funds properly. Many people are familiar with the traditional two-way reconciliations where you compare your checkbook balance to your bank statement. If the … Read More
How can my law firm prepare for a trust account audit?
Should your firm undergo an audit of its trust accounts, it’s likely to make you a little nervous even if your documents are meticulous. Given that improper handling of a trust account can lead to an ethics violation, audits can be stressful even under the best of circumstances. This means you want to make sure your records are audit-ready at … Read More
What is considered a misappropriation of trust accounting funds?
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