How do I handle interest on settlement funds?

CosmoLex Team

The handling of interest from settlement funds kept in trust accounts falls under Model Rule 1.151 regarding the safekeeping of property. Because the funds are considered to be the property of the client as long as they remain in the trust account, the client may be entitled to any interest accrued during its term in the account. In general, the … Read More

How to Avoid Client Ledger Overdrafts

CosmoLex Team

Keeping track of individual client ledger balances and making sure there are sufficient funds to cover any disbursements is a requirement of trust accounting compliance[1]. To prevent a situation where there is an overdraft on a client trust account, you must keep careful track of the balances of each individual trust account. These funds are typically pooled into one larger … Read More

Do I need to keep original canceled checks for compliance purposes?

CosmoLex Team

Rule 1.15 of the American Bar Associations’ model requires lawyers to keep complete records for trust accounts. As part of this, lawyers should be prepared to keep supporting documentation for all transactions and balance amounts. When acting as a fiduciary for client funds[1], part of that responsibility requires lawyers to be able to substantiate their books, reconciliations, and transactions. Should … Read More

What do I do if a client overpays?

CosmoLex Team

If a client overpays, those additional funds belong to the client and at no point should the law firm keep them. It is the lawyer’s responsibility to make sure those funds make it back to the client. Those funds should be placed back in the client trust account and a diligent effort made to reimburse them for the overage. The … Read More

What trust accounting reports should my firm be generating?

CosmoLex Team

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 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