Although the concept of law firm trust accounting may seem relatively straightforward (keep money that is not yours in a different account), the actual practice of trust accounting may be more complicated.
That is why to ensure that your firm completes this process correctly, the guide below will walk you through the best practices you need to know about law firm trust accounting and how to ensure your firm is up-to-date with the basics of this professional and ethical responsibility.
Trust accounting refers to the process of keeping track of all client funds that are held in a trust and making sure that bookkeeping regarding these accounts meets the state’s requirements.
Yet, while the laws regarding trust accounting may vary, in general, these laws require firms to keep detailed records of the money that is coming in and leaving their trust accounts. These firms should also track every client’s trust account balance and ensure funds do not commingle. When lawyers fail to take these steps, they can not only lose their clients but also their law license in the process.
The trust account process often has very stringent requirements for maintaining accurate information regarding a firm’s trust accounts. For instance, this process requires law firms to:
In addition to the above dos and don’ts when it comes to trust accounting, you should also know that there are certain funds that should never be put into a trust account. These include:
You need to remember that the trust account should only have the money that the client provided the firm for a designated purpose. As a result, these accounts should not be used to manage payroll or help the firm in any capacity.
No matter what size your law firm is, there are certain practices you should implement to ensure that your bookkeeping and your firm are compliant with legal and ethical rules, especially regarding your client’s funds.
These practices include the following:
If you are looking for further information regarding trust accounting or want to work with professionals to help you with this process, then look no further than Back Office Legal. Instead, contact us today to speak with one of our trust accounting specialists, and let us go over all the ways our skilled team can help you and your firm.