A lawyer trust account is a special bank account in which clients' funds are kept safe until it's time to withdraw them. Whether it's known as a client's fund account or a lawyer's trust account, using a lawyer trust account is a good business idea for lawyers who have money as an advance (or any other money) on behalf of a client for their case. And there are lawyer trust accounting guidelines that every lawyer should understand and follow. Keep money that is not yours in a separate account so you don't spend it accidentally.
This includes unearned fees (usually paid as an advance), settlement funds or anticipated costs, and court fees. As an attorney, you have many resources and CLE available to help you better understand your trust account and the rules and regulations behind managing your trust account. The lawyer trust account must be maintained at a financial institution or branch located in the state of New Jersey. Having these documents handy will be useful for trust reconciliations and annual Trust Report requirements.
When you open an attorney trust account, also known as an IOLTA account, you must be explicitly designated as such with your bank. But the rules about what money can be combined or kept can become complex, so if there is any doubt about where the client's funds should go, putting them in a lawyer trust account is the smartest decision. The Smokeball legal billing software is compatible with IOLTA trust accounts, but it is important that lawyers pay close attention to the rules that govern the jurisdiction in which they work. The lawyer trust account ensures the separation and security of client funds and helps law firms avoid accidentally combining client funds with law firm funds.
For example, some jurisdictions may require lawyers to place in a law trust account. any part of a fixed fee that has not yet been earned. However, the rules surrounding trust accounts can be nebulous at times because they vary from state to state, so fiduciary accounting can be a risk of malpractice. In some jurisdictions, it is not required to deposit clients' funds into a law trust account, while in others lawyers are allowed to deposit funds directly into the law firm's operating account as long as the funds have already been earned.
If you would like to speak with an experienced lawyer trust account professional, Bederson is at your service. Instead, it will first go to the trust account so that the lawyer can deduct fees, third-party claims and expenses. In addition, these trust funds do not bear interest because it is unethical for lawyers to derive any financial benefit from funds belonging to their clients. When creating a new trust account, ask your financial institution to provide trust account statements at the end of the reporting period.
Fortunately, there are legal billing software solutions like Smokeball that provide trust account accounting so there is never a question about how much money a customer has in their trust account.