When attorneys receive legal retainers or other advance deposits from clients, those legal retainers must be kept in a separate bank account and may not be co-mingled with attorneys’ own funds. Only after service has been delivered and billed may those funds be transferred to attorneys’ own accounts. There have been important recent developments affecting client funds accounts, impacting both attorneys and clients. As you may have seen in the news there have unfortunately also been some serious scandals in which client funds were misappropriated, most notably by the Dreier Law Firm in New York. Now is a good time for both attorneys and clients to review requirements for client funds accounts.
Client funds are typically placed in IOLTA accounts (Interest on Lawyers in Columbus GA). These accounts are a specific kind of bank account and are required by state law. The intent of the law is for interest earned on client funds held in trust by attorneys to be remitted to state committees and ultimately used to provide legal aid to the indigent. IOLTA rules require attorneys to maintain specific accounts, internal controls and bookkeeping for client funds. Visit Parkersburg WV Personal Injury Attorneys | Serious Injury Law Group for more information about legal matters. On the other hand, when you are under the age of 21 it is against the law to have any alcohol in your system. This especially matters when you are behind the wheel. Thomas S. Barton, an experienced lawyer in Atlanta, specializes in helping minors involved in DUI cases. His team handles under 21 dui charges in Georgia.
Recent Developments Affecting IOLTA Accounts
- As part of its attempt to stabilize the banking industry and protect depositors, the FDIC recently expanded its insurance coverage. The FDIC is now providing unlimited coverage to IOLTA accounts at participating banks through December 31, 2009.
- The requirements Massachusetts banks must meet to offer IOLTA accounts have changed as of February 1, 2009. Banks must be re-certified to offer IOLTA accounts. Some banks previously certified to offer IOLTA accounts are no longer certified. To be IOLTA compliant, attorneys must have their IOLTA accounts at banks that have been re-certified.
Why Should Attorneys Care About IOLTA Compliance?
- Comingling of attorney and client funds is a serious ethical violation which can lead to disciplinary action.
- Having a dedicated client funds account is insufficient; the law stipulates that it must be a specific IOLTA account at an approved bank.
- Attorneys, partners, and their firms are liable to clients if client funds are used improperly.
- There is reputational risk from non-compliance: perception is reality even if there is no misuse of client funds.
Why Should Clients Care About Their Attorneys Being IOLTA Compliant?
- Many instances of fraud by attorneys involve misappropriation of client funds facilitated by comingling of attorney and client funds.
- An IOLTA account alone will not prevent fraud, but full compliance with IOLTA standards including internal controls and records retention significantly reduces the risk of fraud.
- IOLTA compliance is indicative of a law firm that is professionally managed and takes its client responsibilities seriously.
Primary IOLTA Requirements
- A client funds account holds all advance payments and legal retainers until services are delivered and billed.
- Client funds accounts can only be held in an IOLTA account at an approved bank (many banks are not approved for IOLTA accounts).
- Three separate ledgers are maintained: Client Ledger, Bank Charge Ledger, and Check Ledger.
- Internal controls are maintained over deposit and disbursement processes.
- Six year retention of ledgers, reconciliations reports, and other documentation.
- If electronic records are kept, as is commonplace today, a good data backup system.
SmartBooks Service is IOLTA Compliant:
- One of our partners is an attorney who understands law firm operations.
- The SmartBooks system includes electronic workflow with internal controls.
- The three IOLTA ledgers and other documentation can be generated with a few mouse clicks.
- Data is backed up daily in secure datacenters.
- Documents are retained for at least seven years.