Introduction
Properly managing IOLTA accounts helps prevent the risk of being disbarred. However, the process can be confusing and cumbersome due to the commingling of prevention and client ledger/reconciliation management.
In this e-book, we’ll guide you through the proper management of IOLTA accounts, including key tips for starting and operating these accounts and how LawPay can help your firm ensure compliance.
Managing an IOLTA Account and Ensuring Compliance
Many state bars commonly require the information below. Visit your state bar’s website for specific requirements.
1. Setup Your Trust Account Through a Bank
Below are some common bank requirements:
- Open a bank with a physical location within your state
- The bank must automatically report any overdrafts to the state bar
- Any interest earned on trust accounts must be sent from the bank directly to the state bar
- The bank must provide copies of canceled checks—either physically or digitally (copies that are digital-only must be maintained for a certain period of time, which is usually six years)
Most state bars require the bank account to be titled a “Trust Account.” In addition, special business-sized blank checks must also be ordered with “Trust Account” printed on them.
2. Arrange A Recordkeeping System
Implement a recordkeeping system to track each client’s funds deposited and withdrawn from your trust account. This process involves keeping an organized record of all receipts and payments for each client. Additionally, all client funds must be properly segregated from each other.
3. Generate Trust and Client Ledgers
As a part of your recordkeeping compliance requirements, you’ll need to generate a trust ledger and a client ledger.
4. Prepare A Reconciliation Process
To ensure that deposits and payments are managed adequately for trust accounts, you’ll need to complete a three-way reconciliation process, which includes:
- Your trust bank account
- Your trust ledger
- Your client ledgers
Three-way reconciliation is a compliance requirement that helps ensure the sum of all client ledger balances always matches your trust ledger and trust bank account activity.
Easily Operate IOLTA Accounts and Build More Client Trust with LawPay
Unlike generic processors, LawPay understands the rules they must follow when accepting client payments. With LawPay, you can easily and quickly receive payments from clients with online pay options—while correctly separating earned and unearned fees and protecting your trust account against third-party debiting. Additionally, you can ensure your internal trust accounting records match the activity/transactions in your bank account with built-in three-way reconciliation.
Schedule a Demo with LawPay
With LawPay, you’ll have access to decades of expertise and knowledge in managing and complying with IOLTA accounts. You’ll be able to manage complex trust accounting and reconciliation processes easily, and if you have any questions, our support team is available to help. That’s why LawPay is trusted by over 150,000 lawyers and vetted and approved by the ABA and all 50 state bars.
Take the stress out of trust account management today and ensure that your firm is in compliance. Book a LawPay demo today.
Adrian Aguilera is the Senior Content Marketing Strategist for LawPay, the top-rated legal payment processing solution. He is based in Colorado Springs, Colorado.