All You Need to Know About Trust Accounting
Are you an attorney and looking for the best accounting software to maintain the trust accounts of your clients? Then, you need to do an extensive research to find the best software that is filled with umpteen features and is meeting the accounting needs. Every lawyer will hold the accounts of the clients’ one or the other time. Following are the few situations where the lawyer is required to hold the trust accounts of the clients
· Funds that are transacted at the start of representing them in the court
· Amount that is related to settle the lawsuit
· Lawyer acting as a fiduciary agent either on behalf of the client or the state where he/she is residing
The money that is in the trust does not belong to the lawyer, but it is stored in the account of the lawyer until the final judgment. The lawyer or a law firm holding the amount of the client in the trust account will be termed as trust accounting. This accounting is nothing but maintaining the accounts of the trust by complying with the state requirements. However, the requirements change from one state to another, but a few rules would be in common to most of the states in a country. It is crucial for a lawyer who is keeping the funds of the clients to maintain an accurate record.
There are some record keeping requirements for every trust accounting which both the attorney and client should follow to maintain accurate information. As part of Fiduciary Accounting, it is imperative for the people holding trust accounts to have the following
Track all the deposits and withdrawals made through this account
A ledger that has details of every transaction made by the client
Create an account journal for every transaction through the account
Reconciliation of accounts every month
There are a few types of funds that can be held in trust account by the Trust Accountant. There include
Settlement funds: These are the funds that are paid by the defendant in the personal injury case or a real-estate transaction.
Unearned income: This is the amount that is paid to the lawyer or the law firm for rendering their services to the client before the case is produced in the court. Few of the expenses that come under this unearned income include fees, advances, and retainers.
Advance costs: This is similar to that of unearned income, but the only minute difference between advanced and unearned income is that, this advanced cost includes all the expenses pertained to the case.
Judgement funds: These are alike to the settlement funds. Based on the judgement given by the court, the amount transferred by the defendant to the victim will be stored in these funds.
Third party funds: This is the amount obtained after selling the client’s property or the amount that is paid to the third party for their rendered services
It is not an easy task to keep track of all the trust funds, especially when you are managing the trust funds of umpteen clients. It is crucial for you to manage the funds of every client separately to make sure that the funds are not misused. Instead of you depending on manual accounting, you need to buy and use the Foundation Software. This helps you to manage all the accounts associated with the trusts effectively and efficiently.
