Mary McPadden 0000-00-00 00:00:00
What is a 3-way reconciliation? The components of a 3-way reconciliation are: 1. total of all client ledgers must equal; 2. the general ledger (checkbook register), which must equal; 3. the bank statement ending balance (plus or minus any outstanding deposits and checks) It’s a Fact! A 3-way reconciliation must occur, at minimum, on a monthly basis. What if I receive both earned fee (and/or reimbursement of costs advanced) and an advance fee deposit in one lump sum? Funds belonging in part to a client or third party and in part to the lawyer must be deposited, intact, into the trust account. In this case, deposit the check into your client trust account and write yourself a check for the retainer fee portion as soon as the check clears and the money becomes available, leaving only the money for the expenses in the client trust account. Under these circumstances, it might be simpler to have the client write two checks; one for your non-refundable retainer and another for client expenses. Any such earned fees and funds for reimbursement of costs or expenses must be withdrawn from the trust account within a reasonable time after deposit. Recommended Best Practice: Deposit funds to trust, disburse third party advances from the firm’s operating account, calculate costs advanced monthly and reimburse operating from trust. Is it permissible to have a ‘holding account’ for incoming wire transfers? Funds are transferred into this ‘holding account’ and then transferred either to the operating or trust account. The ‘holding account’ must be registered as a trust account unless only completely earned funds are being transferred in. If any portion of the incoming funds are an advance fee deposit, the funds must immediately be placed in trust. It’s a Fact! First holding the funds in a non-trust account is not permissible Can we link a PayPal account to the IOLTA account? No. PayPal is not a trust account. Can I disburse funds from a client’s account as soon as I have made the deposit? It takes from one day to several weeks after you make a deposit before the money becomes available for use. A client’s funds aren’t “available” for you to use on the client’s behalf until they have cleared the banking process and been credited by the bank to your client trust account. The time it takes for client trust account funds to become available after deposit depends on the form in which you deposit them. Every bank has different procedures, so when you open your IOLTA account, get the bank’s schedule of when funds are available for withdrawal. Depending on the instrument, you may have to wait as many as 15 working days before you can be reasonably confident that the funds are available. For example, even if you make a cash deposit, the money may not be available for use until the following day. If you deposit a personal check from an out-of-state bank, the money will take longer to be available. It’s a Fact! Either way, until the bank has credited a client’s deposit to your client trust account, you can’t pay out any portion of that money for that client. What types of banking instruments can be drawn against immediately? Even a cash deposit requires one full day before funds can be drawn against the deposit. The next most accessible type of instruments are called “limited risk” deposits. These are: 1. Certified check 2. Cashier’s check 3. Bank check 4. Official check 5. Treasurer’s check 6. Money order 7. Any other instrument in which the payor is a bank, savings and loan association or credit union 8. Check issued by the United States government, state of Arizona or any agency or political subdivision of the state 9. Check or draft issued by an insurance company, title insurance company, or a licensed title insurance agency authorized to do business in this state. It’s a Fact! A lawyer may disburse against uncollected funds of the above named instruments provided: (i) the lawyer has personal funds available to cover the deposit in the event the deposit is returned or fails for any reason; and (ii) such correction can occur within 3 business days of the lawyer learning of the failed deposit. What is a Pre-Audit audit? The goal of a pre-audit is to determine potential deficiencies within a firm’s trust accounting process. Recommended Best Practice: It is recommended to have a knowledgeable third-party review current practices and, if necessary, suggest remedial action to bring the firm into compliance. Visit Balanced Billing’s website for more information about a Pre-Audit Audit.
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