In law school, students are often taught all of the reasons why they need to protect client money and set up a client trust account, but rarely do law schools teach students and new attorneys how to set up and manage their IOLTA account. Last week on Total Expert Radio, I talked to attorney coach and self-proclaimed “law practice management nerd,” Rjon Robins, about IOLTA management and his new program that teaches attorneys how to set up and manage their client trust accounts.
If you missed the show, you can stream it online or download the mp3 by visiting the Total Expert Radio page on Blog Talk Radio. Here are a few highlights from the show:
- If the client has a legal right to get the money or the property back, it belongs in an IOLTA/client property trust account. If the client does not have a legal right to get the money or property back, it does not belong in the trust account.
- When the client no longer has a legal right to the money or the property, it is time to take it out of the trust account.
- Understand that trust accounting rules apply to more than just client money.
- There is more than one type of trust account. Lawyers may choose to set up an IOLTA or a separate interest-bearing trust account for an individual client.
- Most attorneys will opt for IOLTA since they provide a simple way to hold client or third-party funds for a short period of time.
- If an attorney wants to create a separate interest-bearing trust account, the following factors should be considered: the rate of interest that will be applied to the funds, the amount of time the funds will be held, and the cost of administering the separate account.
- Most of the time, attorneys will not want to deal with the accounting necessary to use a non-IOLTA account since administration and accounting could take up too much time and create added expenses.
- Attorneys do not need a trust account in some circumstances (e.g. when the attorney offers flat rate billing or takes all fees in advance, earned upon receipt). Attorneys should be aware of the pains of accounts receivable and the risks of non-payment when they do work before sending a bill or collecting a retainer.
- Don’t delegate things that you do not know how to do yourselves. Learn the basics in trust accounting and management before you delegate tasks to employees or automate trust account management with software.
Some local bar associations have created comprehensive guides on trust accounting.