Part 1 of a discussion on lawyers Three Step Trust Reconciliation.
Introduction
Ordinary commercial accounting software works for any business.
Lawyers need custom software to manage both their business accounts and client trust accounts.
Software tailored for lawyers trust accounts should provide for a clear distinction between business and trust transaction, as well as facilitate the easy reconciliation of the trust.
In the discussion which follows each of the Three Steps of Trust Reconciliation will be explained in detail.
General and Specific
Make sure that you understand the general concepts explained here. Bear in mind that local conditions may vary. It is important to understand that from General Concepts, we work towards Specific Application. Even if the general concept of trust accounting applies to you, your local jurisdiction may have rules which require specific conduct or reports which may be highly localized and unique.
The assumption is that the same basic concept of lawyers trust accounts, trust banking accounts and comparison of balances apply to all jurisdictions.
Make sure you understand what specific rules you need to comply with.
Regulation
Regulation refers to the rules that apply in your local jurisdiction. These may apply at national, state, provincial or local level, or even a combination of these. Regulation stipulates what conduct is acceptable and defines trust assets. Often administrative procedure and conduct and professional liability closely follow the requirements of the regulatory framework.
Compliance
Compliance entails conduct which conforms to the requirements stipulated by Regulation. Compliance entails certain administrative procedure and the production of reports which indicate that the results of conduct reflect compliance with regulation. Non-compliance indicates contravention of applicable regulation and may imply professional liability.
Enforcement
Non-compliance with Regulation typically results in Enforcement of the Regulatory requirements on the local firm to remedy non-compliance and guarantee regulatory compliance. Very often this is accompanied by serious sanctions directed at the responsible lawyer. Worse case scenario outcomes include prison terms for theft and disbarment from the legal profession.
Managing Client Trust Assets
Ethical exhortations not to steal clients funds are often more emotional than practical. The reality is that very few lawyers will actively engage in the theft of clients’ trust assets. Rather, lack of understanding of the regulatory framework and requirements and a failure to implement effective compliance measures, contribute over time to a situation of critical non-compliance resulting in deficits and trust reconciliation failures.
Three Step Trust Reconciliation
DynamicLTA uses easy to use and clear Three Step Trust Reconciliation reports which facilitate understanding of regulatory requirements and allows at sight confirmation of compliance with these requirements. Technology which supports your practice and provides peace of mind.
In the discussion which follows, each of the different Steps in the Trust Reconciliation process is discussed and illustrated with screen grabs from our software.
[Part 2 Follows]
–Dynamic