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

What is a three-way reconciliation?

CosmoLex Team

Everyone who has balanced a checkbook knows how to perform a two-way reconciliation – you verify that the balance shown on your bank statement, when adjusted for uncleared deposits and withdrawals, matches the balance shown in your books or checkbook.[1] Once you have performed a two-way the reconciliation on the trust account, however, you have to perform a third reconciliation … Read More

What do I do when a client fails to deposit a trust refund check?

CosmoLex Team

When a client fails to deposit a trust refund check, you should make reasonable efforts to verify any changes to the client’s address.[1] If you are unable to locate the client, check with your state or local bar association to see what your next steps should be. The bar rules may require you to wait an additional period of time … Read More

After making a deposit to trust, how long do I have to wait before I disburse funds?

CosmoLex Team

Most state and local bar rules require attorneys to make sure that a settlement check deposited into a client trust account has cleared the bank prior to disbursing any funds.[1] Many attorneys disburse funds from trust accounts as soon as they become available because they confuse availability of funds with the check clearing (a check clears when the money from the … Read More

How do I avoid commingling trust funds with my business funds?

CosmoLex Team

occurs when an attorney or law firm maintains operating or personal funds in a trust account used to hold client or third-party funds.[1][2] Common situations that give rise to commingling are: Depositing a large sum of personal or firm funds into a client trust account to cover a dispersal from trust Failing to promptly withdraw earned fees and reimbursements for … Read More

Is a retainer the same thing as an advance fee deposit?

CosmoLex Team

Upon entering into an agreement to represent a client, attorneys and law firms frequently ask for the client to pay money in advance for fees and costs.[1][2] In many states, attorneys refer to this advance payment as a “retainer”.[1][2][3] In other states, however, the term “retainer” is defined in the Rules of Professional Conduct as  “a fee that a client … Read More

What is the difference between an operating retainer and a trust retainer?

CosmoLex Team

An refers to funds received from clients that are deposited into the law firm’s operating account. A refers to funds received from clients that are deposited into the attorney’s trust or escrow account.[1] In most states, a retainer paid by a client in advance for unearned fees and future costs is considered to be the client’s funds and must be … Read More

Why would I want to use an Evergreen Retainer?

CosmoLex Team

Attorneys provide services to clients “on credit” because they generally don’t bill the clients until after they’ve actually provided the services. The danger for law firms is that they will do the work, but the client will refuse to pay the bill. If the bill was for a significant amount of legal fees and costs, the client’s failure to pay … Read More