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Trust Account & Financial Mismanagement: Everything You Need to Know

Join the Minnesota Lawyers Mutual Practice Management Webcast Series to learn about trust account management and financial mismanagement in law firms. Get expert advice from Susan Humiston, Director of the Minnesota Office of Lawyers Professional Responsibility, and Todd C. Scott (Moderator). Earn a certificate of attendance.

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Trust Account & Financial Mismanagement: Everything You Need to Know

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  1. Minnesota Lawyers Mutual Ins. Co.Practice Management Webcast SeriesEverything You Need to Know About Your Trust Account & Financial Mismanagement Susan Humiston, Director Minnesota Office of Lawyers Professional Responsibility Todd C. Scott (Moderator) Minnesota Lawyers Mutual

  2. http://lprb.mncourts.gov/

  3. Certificate of Attendance For webcast viewers in allstates: Write down this code and save it. At end of program, you can click on “Get Certificate” Enter the full code and download your certificate. 9 3 R H 7 7

  4. Law firm financial systems are highly regulated which raises lots of questions. $ Q. What is required here? Invoicing Q. What $$ goes in here? Q. How/where do you set up these accounts? Q. Where does unused $$ go? Trust Account Q. What has to happen to transfer $$ here? $ General Account

  5. Common misunderstandings about lawyer trust accounts • Best practices for maintaining books and records. • Errors that lawyers most likely make handling retainers agreements • Warning signs of mismanagement and theft in the law firm. • Financial and email scams aimed at IOLTA trust accounts. • Back-to-basics discussion about handling client funds in trust.

  6. Trust Rules Part (a) The basic rule Client funds must be separate from firm funds • ABA Model Rule 1.15 Safekeeping Property • A lawyer shall hold property of clients or third persons that is in a lawyer's possession in connection with a representation separate from the lawyer's own property. Funds shall be kept in a separate account maintained in the state where the lawyer's office is situated, or elsewhere with the consent of the client or third person. Other property shall be identified as such and appropriately safeguarded. Complete records of such account funds and other property shall be kept by the lawyer and shall be preserved for a period of [five years] after termination of the representation. • A lawyer may deposit the lawyer's own funds in a client trust account for the sole purpose of paying bank service charges on that account, but only in an amount necessary for that purpose. Part (a) Complete records must be kept Part (b) Commingling funds prohibited

  7. Trust Rules Part (c) Trust withdrawals must be earned • ABA Model Rule 1.15 Safekeeping Property (c) A lawyer shall deposit into a client trust account legal fees and expenses that have been paid in advance, to be withdrawn by the lawyer only as fees are earned or expenses incurred. (d) Upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person… a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive and, upon request by the client or third person, shall promptly render a full accounting regarding such property. (e) When in the course of representation a lawyer is in possession of property in which two or more persons (one of whom may be the lawyer) claim interests, the property shall be kept separate by the lawyer until the dispute is resolved… Part (d) Funds in trust are exclusively clientsShall provide full accounting Part (b) Property in dispute in trust

  8. Got Questions? Click here type in your question for the panel.

  9. Common misunderstandings about lawyer trust accounts • Best practices for maintaining books and records. • Errors that lawyers most likely make handling retainers agreements • Warning signs of mismanagement and theft in the law firm. • Financial and email scams aimed at IOLTA trust accounts. • Back-to-basics discussion about handling client funds in trust.

  10. Accounting for Law Firms Manual System: Nothing in the rules forbids a lawyer from managing firm finances with check book and simplified spreadsheets. Problems: Numerous calculations, multiple accounts & data entries increases the likelihood many errors will occur.

  11. Reconciling Statements Q. Is reconciling bank statements necessary?

  12. Invoicing & Trust Balances • Basic hourly legal bill with retainer balance • The invoice will usually have all of the attributes of an ordinary hourly bill, but also: • Trust account section showing prior balance (before invoice) and current balance (after invoicing.)

  13. Trust Account Scams • Why does the scam work? • The checks look real. • Speed is crucial for the scam to work, scammer pressures attorney to disburse funds. • Attorney thinks check has “cleared” • Efforts to verify check fail

  14. Purchasing Software Q. When should I but a full integration accounting program made just for lawyers?

  15. Certificate of Attendance For webcast viewers in allstates: Write down this code and save it. At end of program, you can click on “Get Certificate” Enter the full code and download your certificate. 9 3 R H 7 7

  16. 1. Click Here 9 3 R H 7 7

  17. 2. Enter Code Here! 9 3 R H 7 7

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