Many of our possessions require general maintenance, but none more important than caring for a pet. Pets provide love and affection you simply can’t get from a car. To best manage your lawyer trust account, think of and care for your trust account the way you would take care of your dog. The highest percentage of ethics violations are due to mismanagement of the lawyer trust account. Most firms use the IOLTA to hold client monies and prepare for payments, so treating it with a high level of care is practical and should be a top priority. To care for your dog, you attend to its particular needs, such as physical and mental stimulation, dietary monitoring, and health check-ups. These steps for owning a happy and healthy dog reflect similar methods for maintaining a sound trust account.
A word of caution: don’t be fooled by size. A 10-pound shih tzu will require a different level of care than a 120-pound St. Bernard. At first glance, you might assume the latter is more high maintenance, but don’t rely on initial impressions. A shih tzu needs highly attentive grooming, while a St. Bernard is a more relaxed companion. If a trust account seems more like a shih tzu than a St. Bernard, be just as wary of mismanagement as if the account were larger with more activity. Either way, you must devote adequate attention to maintain the trust account.
Dogs need frequent exercise no matter the size or energy level, and most dogs benefit from a regular schedule. In the same way, your trust account requires repeated three-way reconciliation, at least monthly. The core issue underlying many trust accounting violations is poor recordkeeping, so creating and adhering to a consistent reconciliation schedule will ensure it is done regularly and help prevent errors when tracking transactions. See our resources below for information on how to do a three-way reconciliation.
Any owner concerned about their dog’s health closely monitors the dog’s ins and outs − which attorneys should also do with their trust account. Keeping track of client deposits and withdrawals will encourage awareness of potential issues with the account. For example, the PLF recommends using the 3-5-10−day guideline to wait for a deposit to clear the bank. Wait three days for a check to clear from a trusted client in your area; delay five days for out-of-area checks; and pause 10 days for any suspicious checks or those from out of state. The watchful eye of most dog owners can alert them to serious digestive issues, just as careful attention to your trust account can help guard against the mismanagement of client funds.
Taking a dog to the vet is necessary to maintain the dog’s health. Because an owner is dependent on the veterinarian’s expertise, the owner is accountable to report to them the dog’s condition. If the dog owner does not provide accurate information, the vet will not be able to properly diagnose any issues. As a fiduciary of the client funds, the attorney is held accountable to the client. The money in the trust account belongs to the client, and the trust owner must account to the client what is occurring with their funds. Providing the client with a monthly invoice or billing statement gives them the chance to understand the status of their case, as well as providing both attorney and client an opportunity to check for errors. By making this information regularly and easily available, you are building trust with the client, prompting them to ask questions, and hopefully preventing billing issues at the end of the case.
Health and Behavior Accountability
If a dog bites another dog or a person, the owner will be required to disclose this at the intake for a doggie daycare and, in the worst-case scenario, might be sued. Similarly, if the trust account is mismanaged and/or is overdrawn, the attorney and the bank are required to notify the Bar. Attorneys are held accountable to the Bar for the mismanagement, which could result in an ethics violation.
Loving a dog can be a great joy, but it is important to know how best to manage that dog’s needs. The owner must understand the details of the dog’s care, provide regular exercise, keep track of inputs and outputs, account accurately to their vet, and take steps to prevent misbehavior. Any responsible dog owner should know and follow these basic steps of good ownership, and responsible attorneys should do the same with their lawyer trust account.
See the links below for additional information and forms for managing your trust account. Contact a practice management attorney if you have specific questions regarding your trust account. We also have other resources available on our forms page.
- Avoiding the wire fraud nightmare – what you need to know to protect yourself and your clients: December 2, 2021 – practicePRO
- 10 Principles of Trust Accounting - Law Technology Today
- The Finance Issue (americanbar.org)
- Frequently Asked Trust Account Questions
- How to Set Up Trust Account in Quickbooks
- Trust Account Reconciliation