Law Practice Law Practice ManagementManagement

Class #8Class #8

Trust Accounting and Trust Accounting and RulesRules

Bank AccountsBank Accounts

Three checking accounts on day 1:Three checking accounts on day 1: Personal accountPersonal account Office accountOffice account Trust (IOTA) accountTrust (IOTA) account

Tip: Use time/billing/accounting software Tip: Use time/billing/accounting software customizations to color key screen customizations to color key screen checks to actual paper checks – avoids checks to actual paper checks – avoids confusionconfusion

Personal accountPersonal account

Print “Personal Account” on:Print “Personal Account” on: ChecksChecks CheckbookCheckbook Deposit SlipsDeposit Slips

Clearly indicate that this is not a firm Clearly indicate that this is not a firm operating account or trust accountoperating account or trust account

Only for non-office personal or family Only for non-office personal or family expendituresexpenditures

Spouse may be a signatory on this accountSpouse may be a signatory on this account

Office accountOffice account

Print “Office Account” on:Print “Office Account” on: ChecksChecks CheckbookCheckbook Deposit SlipsDeposit Slips

For all items that are, or might be, related For all items that are, or might be, related to the income and expenses of the law to the income and expenses of the law practicepractice

Spouse or assistant may be signatory on Spouse or assistant may be signatory on this account, but for use only in clearly this account, but for use only in clearly defined situationsdefined situations

Trust (IOTA) accountTrust (IOTA) account

Print “Trust (or “IOTA”) Account” on:Print “Trust (or “IOTA”) Account” on: ChecksChecks CheckbookCheckbook Deposit SlipsDeposit Slips

NEVER use for your own moneyNEVER use for your own money You are the ONLY signatoryYou are the ONLY signatory Be aware of the rules for Be aware of the rules for accountsaccounts

and and record keepingrecord keeping

Required Trust Account RecordsRequired Trust Account Records(FL Rule 5-1.2)(FL Rule 5-1.2)

Designated as “trust account”Designated as “trust account” Original or duplicate deposit slipsOriginal or duplicate deposit slips Original cancelled checksOriginal cancelled checks Documentation for disbursements and Documentation for disbursements and

transfers from trusttransfers from trust Separate cash receipts and disbursements Separate cash receipts and disbursements

journaljournal Separate file or ledger for each client or Separate file or ledger for each client or

mattermatter All bank statements for each trust accountAll bank statements for each trust account Retain all of above for Retain all of above for 6 years6 years

Trust account maintenanceTrust account maintenance

Surest and fastest way to get Surest and fastest way to get suspended or disbarred is to ignore suspended or disbarred is to ignore trust account rulestrust account rules

Read Read Foonberg’sFoonberg’s The ABA Guide to The ABA Guide to Lawyer Trust AccountsLawyer Trust Accounts

Foonberg’sFoonberg’s trust account tips trust account tips

Use “Trust” in account name and on Use “Trust” in account name and on all account materialsall account materials

Use red checkbook cover (to Use red checkbook cover (to designate “danger”)designate “danger”)

You are the only signerYou are the only signer Reconcile account monthly (required Reconcile account monthly (required

by FL Bar Rules)by FL Bar Rules) Understand the IOTA rulesUnderstand the IOTA rules

Foonberg’sFoonberg’s trust account tips trust account tips (cont.)(cont.)

Notify the client promptly of all changes to Notify the client promptly of all changes to their trust account balancetheir trust account balance

Know if your jurisdiction permits non-Know if your jurisdiction permits non-refundable retainers (directly to operating refundable retainers (directly to operating account, not to trust)account, not to trust)

Do not commingle firm or personal funds Do not commingle firm or personal funds with client funds in the trust accountwith client funds in the trust account

Do not write checks on funds deposited Do not write checks on funds deposited into trust until you know the deposited into trust until you know the deposited check is good (overdrawing trust account check is good (overdrawing trust account is is per seper se ethical violation - ethical violation - no defenseno defense

Check security tipsCheck security tips

Don’t use a check writing machineDon’t use a check writing machine Don’t use a signature stampDon’t use a signature stamp Keep all checks in a securely locked Keep all checks in a securely locked

drawer or cabinetdrawer or cabinet Restrict access to checks to self and Restrict access to checks to self and

trusted assistant (and/or spouse)trusted assistant (and/or spouse) Avoid leaving a space between the Avoid leaving a space between the

dollar sign and the written number to dollar sign and the written number to keep the check from being altered keep the check from being altered

More check security tipsMore check security tips

Order checks and deposit slips from a Order checks and deposit slips from a reputable sourcereputable source

Make sure checks have appropriate Make sure checks have appropriate security features:security features: Chemically sensitive paperChemically sensitive paper Erasure protectionErasure protection Microprint signature lineMicroprint signature line Warning box and security screen in Warning box and security screen in

endorsement area on backendorsement area on back Personally sign all checks and do monthly Personally sign all checks and do monthly

reconciliationreconciliation

Other bank accountsOther bank accounts

Savings accountSavings account Not much use early in life of your Not much use early in life of your

practicepractice Payroll account (Payroll account (or use a serviceor use a service))

Use as a separate checking account for Use as a separate checking account for payroll and payroll taxespayroll and payroll taxes

Use special payroll checks with spaces Use special payroll checks with spaces for withholdingfor withholding

Transfer enough from “office” account Transfer enough from “office” account to equal gross pay plus (per to equal gross pay plus (per Foonberg, p Foonberg, p 415415) 12% to 15% for payroll taxes, ) 12% to 15% for payroll taxes, workers comp., etc.workers comp., etc.

Avoid being a money laundererAvoid being a money launderer

Client may ask you to deposit one of Client may ask you to deposit one of their checks in exchange for a check their checks in exchange for a check from your accountfrom your account

Could subject you to state and Could subject you to state and federal criminal and civil liabilityfederal criminal and civil liability

Selecting a bankSelecting a bank

IOTA accounts profitable for banks IOTA accounts profitable for banks (and also for indigent legal services)(and also for indigent legal services)

Convenient location (to office or route Convenient location (to office or route between home and office) is between home and office) is importantimportant

Low or no fees:Low or no fees: No service charges on any accountsNo service charges on any accounts Free check printing (within limits)Free check printing (within limits) Courteous (even preferential) treatmentCourteous (even preferential) treatment