LEAP is an all-in-one practice management software that includes trust accounting capabilities. LEAP’s Trust Reconciliation module allows Massachusetts attorneys to easily compare the total of all client matter balances against the current bank balance, confirming the availability of funds prior to withdrawal. Client transactional history mirrors bank statement activity enabling quick and easy rectification of any anomalies.
LEAP’s report module facilitates completion of three-way reconciliation. The reconciliation may be maintained day-to-day in draft format, ensuring continuous awareness of trust fund availability. All required trust records are electronically stored and reproducible when required. Using this type of practice management software will ensure your law firm is compliant with IOLTA trust accounting requirements.
In Massachusetts, lawyers who hold funds on behalf of a client must place those funds in either an IOLTA account or a client trust account which pays interest to the client. Attorneys use IOLTA accounts if the interest amount would be tiny or the cost of setting up an interest account for a client would be more than the interest benefit for the client. In these situations, the state of Massachusetts requires attorneys to place the funds in an IOLTA account. These accounts allocate interest earned to the Massachusetts Bar Foundation, the Boston Bar Foundation, and the Massachusetts Legal Assistance Corporation for charitable purposes.
For real estate lawyers in Massachusetts, maintaining IOLTA-compliant trust or escrow accounts is something that you shouldn’t have to spend a lot of time thinking or worrying about. IOLTA guidelines can be challenging to understand and follow, especially if you are not on top of your legal trust accounting. If you manage client funds improperly, it could end up costing you your ability to practice law if your trust accounts are audited. Fortunately, there are some simple steps you can take to help survive an audit or even avoid it in the first place.
Never Borrow Money from a Trust Account
One of the most common mistakes attorneys can make with trust accounts is borrowing money from them. Doing this can lead to your law firm being audited and you or your co-workers losing the ability to practice law.
Borrowing money from clients’ trust accounts is one of the most common reasons for disbarment. Even if a member of your support staff is the one who technically withdraws the money, the lawyer would still be responsible and could be disbarred.
Use Practice Management Software to Track and Manage Your Trust Accounts
The most important thing you can do when managing clients’ trust or escrow accounts is to invest in legal practice management software which integrates with your accounting system. Legal trust accounting software will allow you to see all your trust accounts instantly and keep track of any withdrawals from the account and deposits into the account. Maintaining a digital paper trail of your trust account activity will ensure that you survive an audit from the state bar.
Some legal practice management systems also allow you to generate custom IOLTA reports. These reporting capacities make it easy to determine from which employee any illicit transactions into or out of a trust account have come from.
Never Commingle Attorney and Client Funds
Not every trust account mistake is a deliberate misuse of funds by an attorney. Another common mistake is commingling client funds with attorney funds. This commingling is often not done with malicious intent, but out of a lack of understanding of trust accounts.
For example, if a lawyer charges a client for the time spent filing a document as well as extra money for a court filing fee, many lawyers combine these two fees into one account. However, regulations indicate that lawyers must hold the court filing fee trust. Using a trust account as an operating account can lead to your firm being audited and potential disbarment.
Maintaining a record of your clients’ trust accounts with a practice management system is a great way to remain compliant with IOLTA regulations. Consider using IOLTA complaint legal practice management software to ensure never commingling funds.