Successful Trust Account Management

A legal trust account is a fund set up by a lawyer to hold client funds related to ongoing litigation. In a sense, it is like a business checking account, though, very importantly, these funds are neither the lawyer's nor the lawyer's firm's property. Most jurisdictions have requirements that mandate lawyers and their firms to keep lawyers' business accounts separate from their clients' accounts.

Below are a couple of best practices to keep in mind when setting up and managing your legal trust accounts.

1) Be aware of regulatory requirements

As a lawyer, you must be aware of any regulation, statutory or otherwise, pertaining to setting up a trust account. This is particularly important as the particularities of the regulations may differ according to jurisdiction. For example, some states like Georgia and Florida have rules that allow attorneys to set up client trust accounts only if these accounts are housed in financial institutions operating in the same state as the lawyer's office.

Rule 5-1.1(a)(1) of the Florida Bar states the following:

  • A lawyer must hold in trust, separate from the lawyer's own property, funds and property of clients or third persons that are in a lawyer's possession in connection with a representation. All funds, including advances for fees, costs, and expenses, must be kept in a separate federally insured bank, credit union, or savings and loan association account maintained in the state where the lawyer's office is situated or elsewhere with the consent of the client or third person and clearly labeled and designated as a trust account...
  • First, if you practice in Florida, the funds of any one client must be kept separate from the funds or property of your firm and other clients. Second, the client's funds have to be kept in a federally insured bank account, credit union account, or savings and loans association. And third, the account receiving the client's funds has to operate in the same state as the one in which your law office operates (unless the client gives their consent for the account to be placed elsewhere).

2) Be aware of banking stipulations

You should be very aware of your bank's terms regarding fees. Not only is the firm's business checking account to be kept separate from a client's trust account, you also have to make sure that fees that may accrue to *your* firm account are not drafted to theirs. This may require that you tell your bank to draft any checking fees and so on to *your* operating account. You are responsible for honoring your fiduciary interests to your clients, and it is your responsibility to make sure that you take the appropriate steps to alert your bank so that you do not incur any penalties with your bar association.

Bar associations at both the federal and state levels have put regulations in place to protect legal consumers from lawyers' misconduct. If a lawyer breaks a rule or otherwise behaves in a harmful manner, the bar association to which the lawyer belongs may sanction or even disbar the lawyer depending on the severity and duration of the misconduct. These processes are usually begun after disgruntled clients complain or after unannounced audits. Many states and jurisdictions have protocols to audit firms without prior announcement. It is in the lawyer's best interest to know these protocols and the rules that underlie them if they are not to run afoul of the regulatory mechanisms.

3) Maintain transparency

Another critical issue to keep in mind is that you should always be in close and transparent contact with your clients. Keeping clients apprised of fees, billable hours, and even possible banking movements in their trust accounts can make them feel that you are trustworthy, all of which can lower your chances of receiving a complaint and being reprimanded by the legal authorities. Furthermore, the more transparent you are, the likelier it will be to build long-lasting client relationships.

4) Use management software

Keeping yourself organized with case management software like Maatdesk will make it easier to bill your clients properly while keeping track of your client's funds. Maatdesk comes with a billing function that facilitates client payments. You can easily set those payments to land in the trust account. Again, always make sure that all payments and funds operate with maximum transparency and that no unknown movements in the trust account occur.

Don't hesitate to get in touch with us if you have any questions. Maatdesk is case management software that seeks to make the running of your firm easier so you can spend more time on your legal responsibilities.