Don’t skip this crucial topic as you end your year -- correct management of your Trust Account. Research and know the requirements! Every state bar association has different requirements and regulations, but using some basic best practices will help you to comply with minimum trust accounting standards. Affinity Partner Cindy Melfa shared 7 of her most important tips for trustworthy trust accounting. Here are Cindy’s crucial tips for you to be trustworthy!
Know what goes into your Trust Account
Settlement funds, non-refundable fee retainers, funds owed to lienholders, advances for costs not yet incurred, amounts in dispute, real estate closing costs. Never your law firm’s money – only your clients’ monies.
Take Responsibility and Protect Your Firm
Protect the check stock, consider having statements sent to home address, delineate staff responsibilities and review balances as if your license depends upon it. It does.
Understand and Use 3-Way Reconciliations
Bank statement balances, actual bank account balance and client ledger balance – they all have to match! Know what reports to run from your law firm specific software to be able to verify everything matches EVERY MONTH!
Keep Detailed Trust Account Records
Detailed records must be kept for 7 years after representation ends. Be sure to record prompt return of funds and verify there are no outstanding items before closing a file – never close a file with a trust balance.
Clear those Unclaimed Funds
Avoid mismanagement of uncleared transactions by setting up procedures to review them every 6 months. Void and reissue outstanding checks and make every effort to communicate and find the client. Know your state’s unclaimed funds process for those who cannot be found. Don’t let those items get dusty!
Documentation, Authorization and Storage – Oh My
Be sure to document the source of funds and track the purpose for holding funds with the signed authorizations. Wire fraud is growing rampant! Verify and re-verify wiring instructions and always double check name on account and on check.
One person should not have all the keys to the Kingdom
Checks and balances are in your best interest. Reviews and sign offs monthly by multiple partners or members of the firm are a must and investigate all mistakes, especially those regarding unclaimed funds.
Most importantly, use the right tools for the job. Legal professional software can help you to avoid costly mistakes by properly maintaining and managing your Trust Account. It can help with reconciliations, uncleared item warnings, timing of records retention, tracking funds/sources and reporting requirements. Make it your goal in this new year to maintain a truly trustworthy Trust Account.