Ensuring a net zero balance The objective of maintaining the accountability manual is to ensure that every dollar a lawyer receives on behalf of a client is paid. What is deposited for each customer must therefore also be paid. In the end, each client portfolio reaches a net zero balance. What is an escrow account? An escrow account is a bank account where a lawyer must hold funds that he or she has received in trust on behalf of a client or a third party. Payments A lawyer can only withdraw funds from the escrow account for payments made on behalf of a client. Acceptable payments include, but are not limited to, client costs and expenses, settlement proceeds and attorneys` fees. Payments must not exceed the amount of money available to the Customer in the escrow account at the time of withdrawal. Bank charges, such as .B. the monthly service fee should only be paid from an escrow account if the lawyer has deposited enough personal funds to cover them. Separation of client funds A lawyer or law firm may maintain an escrow account for all of their clients` escrow funds. However, the customer`s money should never be used on behalf of another customer.
To ensure that funds are never misappropriated, a lawyer must keep a client book for each client that accurately records all activities related to that client. When making a deposit, a lawyer should always print the payment slips to include the name of the lawyer or law firm, the name of the client or case, the name of the escrow account, the account number, the bank sorting code and the amount. When copying a trust cheque, a lawyer must include the name of the escrow account on the front of the exam and the name of the client or the client`s case and purpose in the memo field. A lawyer cannot knowingly or unconsciously pay money on behalf of a client in an amount that exceeds the client`s available funds. For example, if Client A has $100 in his escrow account, the highest amount a lawyer could pay for him would be $100. Paying more than $100 for Client A would be borrowing from another client`s assets, a strictly prohibited act. What counts as an escrow account? Escrow accounts are usually sought-after bank accounts held by licensed banks. Escrow accounts must also have write permissions for checks and be clearly identified as customer trust bank accounts. Voting The reconciliation process requires a lawyer to compare the escrow statement, client books and general ledger and record any discrepancies between them. Voting provides third parties with evidence – in the form of an escrow statement – that a lawyer has kept complete and accurate records of his or her escrow account. Therefore, reconciliations must be performed monthly when escrow statements are received. Keep accurate and timely records With the many transactions coming in and out of a lawyer`s escrow account, it`s important to keep proper documentation.
To ensure that a lawyer does not violate any of the escrow account regulations established by the State Bar Association, he or she must record all transactions to and from the escrow account in a timely manner. Keeping records up-to-date, complete and accurate creates transparency and allows law firms to optimize their operations and reduce risk. It also creates an audit trail so that lawyers can demonstrate that they have properly managed their clients` funds and resolve any issues that arise. Deposits A lawyer acting as trustee must immediately transfer all funds he or she receives or holds in the name of a client to an escrow or escrow account. No lawyer`s funds may be deposited into the escrow account, with the exception of funds necessary to open or maintain the account, i.e. a monthly service fee. Important records that lawyers are required to keep and maintain include: bank statements or documents obtained from the bank in relation to the account, instructions or approvals from clients to transfer, withdraw or withdraw funds, client books for each client who has funds in the account, and all records related to escrow votes. Who needs an escrow account? Any lawyer who receives trust funds as part of their legal practice, even if only for a short period of time, must maintain or have access to an escrow account before accepting funds. What are the responsibilities of accepting trust funds? A lawyer has a fiduciary duty to protect funds or property received from a client or third party in an account that is segregated from his or her personal or business assets. This is a personal liability that cannot be delegated as long as these funds or real estate remain in the possession of the lawyer. Responsibility cannot be transferred and will not be excused by ignorance, inattention or incompetence demonstrated by the lawyer or by the lawyer`s or non-lawyer`s staff. Disclaimer: This guide is intended to provide a brief overview of the rules and regulations of fiduciary accounting and therefore does not cover all the rules and regulations relating to the management of trust accounts.
It is the responsibility of each lawyer to ensure that he or she reviews and follows the latest professional rules of the state in which he or she practises. Each deposit must then be recorded in the associated customer book with the cheque number, the date of deposit and a description of the funds received…