Avoid Trust Accounting Pitfalls through Proper Internal Controls

As an attorney, you have a responsibility to act as a fiduciary over client funds, including adhering to all applicable laws and rules regarding trust accounts. The consequences of mismanaging trust accounts can be severe. Trust account violations and abuses can be damaging to your firm's reputation and can result in problems with the state bar association ' and, in some cases, have led to the ultimate demise of an entire firm.

For example, the Florida Supreme Court has disciplined hundreds of attorneys in the past year for violating Florida Bar rules, including dozens who were sanctioned for trust account violations. Recent court orders include several references to trust account improprieties, such as:

• “'misappropriating client trust funds.”
• “'failure to maintain trust account records and procedures in compliance with Bar rules.”
• “'commingling his personal assets with the trust account.”
• “'gross neglect of his trust accounts through his failure to supervise the management of the trust accounts.”

No matter in which state you practice, the mechanics of handling a trust account are basically the same, although the nuances of laws and bar rules may be different from state-to-state. You should take the necessary steps now to proactively assess your firm's policies and procedures over trust accounting and make sure your firm is in compliance with state laws and bar rules.