In order to maintain trust account compliance, be prepared for an audit and avoid sanctions, firms need to adhere to a number of requirements. At all times, lawyers should keep in mind they are acting as fiduciaries for trust funds belonging entirely to their client and that no trust accounts funds are the property of the firm.
Record-keeping and reporting
Firms are responsible for maintaining clear records showing the flow of trust account funds, including their usage, purpose, and balances. Firms should:
- Maintain accurate records for receipts and disbursements for general and individual matter ledgers, including date, matter, purpose and amount
- Regularly run required reports, including three-way reconciliations
Handling of funds
- Keep trust account funds and matter funds separate, including proper management of retainer funds, earned fees and settlement monies
- Never move funds to the operating account which are unearned
- Ensure credit cards payments are deposited correctly and no fees are charged to the trust account
- Don’t overdraft individual client trusts
- Keep trust accounts at banks that are approved by your local bar association
Firms should also be aware of uncleared checks and address them, including contacting clients and following unclaimed funds procedures if necessary.
This is a brief overview of compliance requirements and it’s important to become familiar with the full breadth of the American Bar Association rules. Additionally, each state has their own specific requirements regarding trust accounts, so be sure to check with your local association for a complete set of rules.