Trusting Your Trust Accounts
Being an attorney is all about earning and maintaining trust. Trust from your client that you’re representing her interests to their fullest. Trust from your state bar that you’re competently executing your duties. Trust from your partners that you’re fulfilling the needs of the firm.
Trust accounts are no different. As you undoubtedly already know, trust accounts are named as such because you hold funds in trust for the client who deposited them with you. They do not belong to you. Misusing, abusing, or misappropriating them is a serious offence contrary to both state criminal laws and regulatory measures governing the practice of attorneys.
There are two broad categories of trust account malfeasance: intentional and negligent.
Intentional
I won’t take up much space on this sort of trust account misappropriation. Chances are that you’re not the sort of person who would intentionally steal funds from a client you’re sworn to defend and represent. Suffice to say, don’t do this! It’s wrong, destructive, and short-sighted!
Negligent
Negligent mishandling of trust accounts is the far more common species of trouble that lawyers find themselves in. Trust accounting must be handled with great care and there is no tolerance for mistakes. Account reconciliations that reveal even a penny of difference between a firm’s registers and a bank balance require immediate attention. Remember as well that negligence doesn’t just entail making active mistakes. It can include failing to adequately address future contingencies that may arise through no fault of your own.
Too often attorneys allow their trust funds to descend into a barely controlled morass of loose-leaf. When this happens, you’re a short absence, illness, or mistake away from a trust accounting problem. In addition to the benefits of having a bookkeeper I described last week, one of the primary advantages of hiring a bookkeeper to keep an eye on your trust accounts is that he or she will be able maintain a degree of continuity and uniformity in your books should you need to absent yourself from your practice for a short or extended period of time. While you’re away, you won’t need to worry about your trust accounts deteriorating into a chaotic mess. Additionally, if someone else takes over your books, you’ll have the benefit of handing him or her an organized and coherent system, rather than a cobbled-together set of ad-hoc rules designed by someone not equipped for the task.
In next week’s article I will be delving a little deeper into common trust accounting mistakes made by people who work without the benefit of a professional bookkeeper. But for now, keep in mind that your trust accounting system needs to not just work for you, but without you. If you stepped away from your practice from a short while, do you have someone keeping watch over your clients’ precious funds?
Do you have someone qualified, with the appropriate skill and training, watching your back?