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Who can be a signer on a trust account?

CosmoLex TeamFebruary 7, 2021

Who can be a signer on a trust account?

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Trust Account Signing

Because a trust account essentially involves a law firm or attorney holding a client’s money for them, the American Bar Association and State Bar Associations have strict rules in place to ensure that the client’s money is treated like—well, the client’s money. And not the firm’s.

One of the regulated areas has to do with who can be an authorized signer on a trust account. Read on to understand the process and what steps to take when using electronic disbursements.

Authorized Signatories: CTA, IOLTA, ABA, and State Differences

Depending on a firm’s practice area, attorneys may work with Client Trust Accounts (CTAs) and Interest on Lawyers Trust Accounts (IOLTAs). The latter effectively pool low-interest-earning client retainers and donate the combined interest to support charitable legal work.

When it comes to CTAs, the American Bar Association is clear in their Model Rules for Client Trust Account Records – Rule 2 that “only a lawyer admitted to practice law in this jurisdiction or a person under the direct supervision of the lawyer shall be an authorized signatory or authorize transfers from a client trust account.”[1]

However, when it comes to IOLTA accounts, regulations differ by state—including whether an IOLTA is mandatory or voluntary. In this instance, it’s important to know your State Bar’s requirements.

What to Do in the Age of Electronic Transfers

But the question of who is allowed to be an authorized signatory on a CTA gets complicated when firms use electronic disbursements, which has been happening more and more, especially since the pandemic started.

Specifically, because a bank doesn’t have a record of the authorized signature, it is the lawyer’s responsibility to create a record of who made the transfer.

In these situations, create an authorization form template that includes the following information:

  • The amount being transferred
  • The recipient
  • The client
  • The routing number and bank account number
  • A signature from the attorney who is the CTA’s authorized signatory

Keep all authorization forms for your records, in case of a trust audit. At the end of each month, be sure to check the authorization forms against the bank statement.[2]

This process can be streamlined if you use integrated billing and accounting. Better yet, make it part of your monthly three-way reconciliation process.


References

1. American Bar Association: Model Rules for Client Trust Account Records
2. 7 Reasons Law Firms Still Resist Online Payments

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  • Features
    • Legal Billing & Payments
      • Electronic Payment Processing
    • Business Accounting
    • Trust Accounting
    • Practice Management
      • File Sharing & E-signature
    • Legal CRM
  • Pricing
  • Happy Customers
  • Compare To
    • Desktop Systems
      • CosmoLex vs PCLaw
      • CosmoLex vs Quickbooks
      • CosmoLex vs Tabs3
      • Other Desktop Software
    • Cloud-based Systems
      • CosmoLex vs Clio
      • CosmoLex vs MyCase
      • CosmoLex vs PracticePanther
      • Other Cloud-based Software
    • Manual Systems
    • Starting a New Law Firm