Have you ever wondered how a trust account works?
Reading an invoice from your lawyer can be tricky because most of us are not familiar with trust account practices. We are familiar with service industry businesses such as plumbers or mechanics saying, ‘this is how much it will cost for this product or labor,’ we pay the amount quoted, and they do the work. Similarly, we are accustomed to banks or car dealerships saying, ‘we will give you this much money and these are the terms for repayment.’
So, unless you have hired a lawyer before, most likely you are not familiar with the Interest on Lawyers’ Trust Account (or IOLTA), who oversees them, how they work and what Held Law Firm does to ensure our clients’ “trust”.
The IOLTA is important, and we handle it seriously. In every state, the IOLTA has specific rules and guidelines that are overseen by that state’s Bar Association. Your IOLTA with Held Law Firm is overseen by the Tennessee Bar Association.
For Held Law Firm to have you as a client, we must have a retainer, which is the estimated amount of money that it will take for us to complete the case. Along with signed paperwork, this says, ‘I, the client, give Held Law Firm this money to hold in trust and I hire Held Law Firm to work on my behalf.’ Then the money is deposited into an IOLTA to hold until we have earned it. The money in your trust is essentially yours until we have done work on your behalf.
This trust bank account is separate from our operating account, and there is NO co-mingling of funds.
It is important to keep trust funds separate from operating funds. Trust accounts are for the clients’ money, and operating accounts are for the firm’s money. We require $1000 be kept in trust to provide funding for emergencies or other unforeseen circumstances that might hinder the progress of your case.
Held law Firm tracks your retainer and trust replenishment deposits and withdrawals for invoices with checking account reconciliation, and your trust account is reconciled every month. Held Law Firm has developed multi-level reconciliation for trust accounts. We check and double-check balances, trust replenishments, retainers, and payments. We also use trust account/trust liability ledger, or double-entry accounting. Managing your trust account requires continual attentiveness to guidelines, policies, and ethics of the trust account.
Each month, Held Law Firm sends out invoices for work we have done on our clients’ behalf. These invoices detail the notes and amount of time dedicated to your case. Invoices show expenses, or fees, if any, that we have paid upfront for the client. Clients will see payments made on their account and the remaining IOLTA (trust) balance is also shown. Client invoices track the activity of the trust account assuring that we are paid out of trust only for work we have done.
With all of that in mind, please note that each invoice is dated at the beginning of the month but accounts for work done the month before. Our invoices show work completed by our attorneys and staff on behalf of you, our client, and track the work with detailed descriptions and the time spent on each activity for each client. We use these invoices to show you what we have earned. Your IOLTA is used ONLY for work that we have done on your behalf, and never for office or other operating expenses.
The tally shown close to the bottom of the invoice is the total amount DUE to Held Law Firm for the billing period. The amount below that (date in parenthesis) is what is taken as payment from your IOLTA. A Balance Due may show if there was not enough in IOLTA to cover the work done. The number at the very bottom of the invoice is the IOLTA Balance; it reflects the balance from which Held Law Firm can pay future invoices. If it is $0.00, Held Law Firm requires a trust replenishment of $1,000, per the signed Fee Agreement.
These invoices; however, do not reflect your replenishments (deposits) made to your IOLTA, nor do they carry over balances NOT PAID on previous invoices, though we have that information at our fingertips!
We are happy to chat with our clients about their invoices and any other concern they may have. Give us a call at (865) 637-6550.
This article was written and produced by Charis Kraski.