Billing is a big part of our law office case management software. It has to be because billing is part of running a successful law firm. Along with billing comes managing trust accounts that contain funds clients deposit with their attorneys based on retainer fee arrangements.
Such arrangements are governed by a combination of ABA standards and state laws. Regardless of whether a law firm uses NuLaw or not, it is imperative to maintain retainer fee arrangements with the utmost in legal compliance and professional integrity. This includes how trust accounts are managed.
Trust accounts can be complicated matters, especially for new attorneys who do not quite have the experience to know all of the finer points. From our perspective, there are three things relating to trust accounts that tend to trip up new attorneys.
1. Banks Aren't Big Fans
The laws in most states prevent banks from taking advantage of customers by charging hidden or obscure fees. As such, they make their money on deposit account volume. The more money they have in deposits, the more they have to invest for the purposes of making profit. The problem with trust accounts is that balances are usually kept to a minimum.
This reality is such that banks are not big fans of offering trust accounts. Therefore, it is often difficult to follow the advice of having your operating account at one bank and your trust account at another. A new attorney may not be able to find a bank willing to open a trust account only. There isn't any money to be made that way.
2. Accounts Must Be Opened in Person
Another problem in many states is that attorneys have to physically visit a local bank branch in order to open a trust account. It cannot be done online or over the phone. It cannot even be done by sending a staff member or associate to do the job. Attorneys themselves must make the visit; they must be the ones to directly open their trust accounts.
This is not such a big deal for new attorneys practicing only in the local area. Only one trust account is needed. But a firm with offices in multiple locations, or even operating in multiple states, suddenly finds they have to send an attorney to each separate location to open an account.
3. There Are Different Kinds of Trust Accounts
New attorneys might not be aware that there are three different kinds of trust accounts. The main purpose of all three is to keep funds separate. In other words, all the funds in the trust account belong to clients. Therefore, it should be separated from the attorney's general operating account.
The three kinds of trust accounts are:
IOLTA – The Interest on Lawyer Trust Account accrues interest that is then turned over to the state bar association
IOLA – The Interest on Lawyer Account is essentially the same thing as the IOLTA. It is just a different name used in some states
Attorney Trust – Attorney trust accounts may or may not be interest-bearing. This kind of account is typically reserved for clients with a large amount of cash being held temporarily. Any interest earned on the account goes to the client.
Having robust billing tools built-in to your law office case management software makes billing and account management a lot easier. However, attorneys still need to be aware of all the finer details of trust accounts. In some states you cannot practice without one, even if you don't ever use it. That is how important trust accounts are.
