Keeping The Faith: Trust Accounting Documentation Requirements

Law offices typically must maintain one or more trust accounts to ensure any monies they handle are administered fairly and legally. The regulations governing trust accounting are quite rigid to ensure there are no transgressions, either accidental or deliberate, that would jeopardize the funds.

Attorneys must retain records of all trust accounting transactions. These include deposits, withdrawals or transfers. Each entry must include the client the trust is for, the source of deposit or recipient of withdrawal, the amount of the transaction and the date of receipt. Failure to track even a small transaction calls into question all trust accounting activity for that client and all other clients handled by the firm.

Trustees must reconcile all trust accounting activity every month, ensuring the attorney’s balance matches the balance shown by the bank or other financial institution. If it is a general trust fund that serves many clients, the individual client trust balances must be totaled and reconciled with the account balance shown by the financial institution.

Attorneys must also keep track of canceled transactions and bank statements for the account as well as any other records required by law. Records must be kept for at least six years after the final transaction in the account.

All of this trust accounting information is difficult to track, especially if a practice has multiple trust accounts. It is not uncommon for an office to have a general account for small or short-term trust matters as well as individual accounts for larger or longer-term cases.

Trying to track trust accounting on paper is an invitation to disaster. One misplaced receipt or transposed amount could create serious problems for the practice. Using generic financial software isn’t really much better as it won’t have the unique features needed for trust accounting. You need to find the best legal software options to ensure you administer your trust accounts fairly and accurately.

Although we do business with lawyers, we aren’t lawyers ourselves so consider this information as an informal description of trust accounting. This is not intended as legal advice. You should check with your state bar association for your local trust accounting documentation requirements.

Contact one of the friendly representatives at Easy Soft for more information on how Easy Trust simplifies trust accounting administration.