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

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

What is PCI compliance and why is it important?

CosmoLex Team

In 2006, due to the increase in credit card fraud, the major credit card companies (VISA, MasterCard, Discover, and American Express) decided to develop uniform standards that merchants must follow if they accept credit cards from clients.[1][2] These Payment Card Industry Data Security Standards (PCI-DSS) are designed to ensure the security of your client’s , before, during, and after you … 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

Why are my client trust accounts showing as liabilities on the balance sheet?

CosmoLex Team

Bank account balances, whether trust or business accounts, appear as assets on the balance sheet. The total amount of assets recorded on the left side of the balance sheet must always equal the total amount of equity and liabilities shown on the right side. When your firm deposits a client or into a trust bank account, the trust’s asset balance … Read More