What types of funds should and shouldn't be in trust accounts?

CosmoLex Team

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

What client trust funds can be used to pay an invoice?

CosmoLex Team

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

Can I use a general accounting program like QuickBooks for Legal Trust Accounting?

CosmoLex Team

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

What do I do with unclaimed trust accounting funds if I can’t locate my client?

CosmoLex Team

Lawyers are supposed to act as fiduciaries of client funds, acting in their best interests and protecting their assets. If you are seeing uncleared checks on reconciliations for more than a month or two, you have a duty to look into the funds and try to get them to your client. Additionally, funds may be lingering in trust accounts are … Read More

How long does it take a check to clear the bank?

CosmoLex Team

A check clears when the money from the check writer’s bank account is actually moved into the account where the check was deposited.[1] Because it can take as long as several weeks for a check to clear, federal laws require banks to make funds available for withdrawal before a check has actually cleared.[1] But, if the check fails to clear, … Read More

Why do I need to do a three-way reconciliation of each trust account?

CosmoLex Team

If you practice in Canada, then you are required to perform a three-way reconciliation of individual and pooled trust accounts on a monthly basis.[1] In the United States, as of May 2019, 26 states (AL, AZ, IL, IA, MA, MO, NJ, SC, CA, CT, FL, HI, LA, MD, MS, MT, NH, NM, NC, OH, PA, TN, VT, WA, WI, WY) require … Read More

Why should I use a specialized legal accounting program?

CosmoLex Team

A law firm is like any other business in that it must have a system for recording its financial transactions in order to generate the reports that the owners and officers can use to evaluate the company’s financial health. General accounting programs meet most companies’ needs because they allow the business to record financial transactions and generate the , profit … Read More