ethICaLtrustaCCountIng – PraCtICaLtIPs professionalism & Ethics Committee Chairs : AnthonyGarcia – GarciaMediation & LindseyGuinand – TheFloridaBar
We all know the presumptive discipline for mishandling trust funds is disbarment . Even though many lawyers delegate trust accounting functions to others , our law licenses are on the line .
Tips to avoid common mistakes :
1 . Choice of Bank Matters ! Meet with a branch manager to evaluate familiarity with Interest on Trust Accounts ( IOTA ) bank accounts and The Florida Bar Foundation reporting requirements . The opening bank and the lawyer must file notices with the Florida Bar Foundation and if the account is overdrawn for insufficient funds , a lawyer must affirmatively direct the bank to make that disclosure . Overdraft protection for IOTA accounts is prohibited .
How long will the bank maintain its records ? Lawyers must keep trust account records , including copies of the front and back of cancelled checks for six years . If the lawyer ’ s copies are mistakenly incomplete , will the bank have copies ?
2 . Protect access .
If you grant access , invest in a FDLE background check and consider fidelity bonding .
3 . Liens and obligations to others . A lawyer must promptly notify
the client or third person of receipt of funds and promptly deliver the funds to the person entitled to receive them . The lawyer must refuse to surrender the property to the client when there is a nonfrivolous thirdparty claim .
Failing to honor a known Letter of Protection or valid lien or attempting to unilaterally resolve a dispute between a client or third party can result in discipline . Consider depositing the funds into the court registry and having the dispute adjudicated .
4 . Back to basics . No commingling . No misappropriation . Trust funds should only be disbursed for their specific intended purpose and with client agreement or court approval . Even settlement funds containing attorney ’ s fees should not be disbursed without a client ’ s agreement and , in a personal injury case , a closing statement signed by the client and participating lawyers .
Never use IOTA trust accounts for any personal or law firm reason , including office renovation or holiday bonuses . Law firms may only keep a nominal amount , usually $ 200 , in the trust account to cover bank fees . Ideally , IOTA
Weallknowthe presumptivediscipline formishandlingtrust fundsisdisbarment . eventhoughmany lawyersdelegatetrust accountingfunctions toothers , ourlaw licensesareontheline .
costs are deducted directly from the operating account .
Consider using different colored checks for each account and keep them in different locations to avoid using the wrong check or deposit slip . Simple human error can overdraw the account resulting in a Bar audit .
5 . Housekeeping .
Mistakes happen . Monthly review and established procedures catch errors while they are still manageable .
Many software packages exist for trust accounting . Bar auditors use QuickBooks but comment favorably on the new NOTA program offered to Florida Bar members for free . Before purchasing or implementing any new system , confirm it will generate required monthly reports in the proper format . Ensure you understand the reports . Review them monthly .
Respect but do not fear the trust accounting rules . Trust accounting is only intimidating when you do not know the rules . n
Author : Debra J . Davis , Esq . – Smith , Tozian , Daniel , & Davis , P . A .
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