New Client

[BOB W]

I'm having an interview with a new lawyer tomorrow and was looking for MSSR guidelines but there is none. Can anyone please give me a general overview in handling a law practice, accounting wise. They usually have separate accounts to handle special funds. Do these funds get co-mingled with other clients special funds or do they open individual accounts for each client?

Any other info would be appreciated....

[Unregistered]

If you are talking about the trust account, those funds can be co-mingled with other client funds but not with the firms operating account. As funds are earned they are transfered into the operating account at which time you recognize the income.

[KJ Judd]

Trust funds

The Attorney trust funds (retainers & other trust funds) by law need to be kept totally separate from operating funds or they are subject to severe sanctions from the Bar. Before I went into business for myself, I worked at the tax manager for a large national law firm and prepared their tax returns. So if you have any specific questions, I would be more than happy to help.

What type of entity is the law firm? The one I did have hundreds of K-1s. Generally they are on a cash or modified cash basis. The big issues are any nondeductible lobbying portions of the dues (if there are a lot of members). And watching Sec. 179 to make sure that any individual partners are able to use it on their individual tax returns.

[BOB W]

Jk Judd

This is a new female lawyer who said she formed a Corporation, don't if she made it an S yet. She said she is doing Real Estate and Litigation. I don't know much more about her. Our meeting is tomorrow.

I'm assuming there is nothing special here except I wasn't sure about trust fund account handling. Is the accountant resposible for verifying proper distribution from this trust fund accounts.

NOTE: I have a title closer client and I never see their escrow account info.

[KJ Judd]

Trust fund responsibility

Unless the client specifically requests you to verify trust account disbursement, I say you do not have responsibility. If you have concerns, put something in your arrangement letter that the client is responsible for them.

With a real estate attorney, it is common for the law firm to hold the good faith deposit for the client in a trust account.

[BOB W]

KJ Judd

Thank you for your help. I'm assuming you mean NOT in a separate trust account for good faith deposits???

[JON]

Trust funds kept by

case number. Interest on trust account may be required to be paid to another party-MN. Advance costs is an interesting subject. Costs incurred before billed or paid by client not on the cash basis. They are great clients and referral base...

[KJ Judd]

No. Good faith real estate deposits do go in a separate trust account because they are not the attorney's funds. It breaches her fiduciary duty to benefit from them. If the amount of the funds is large enough a separate account is set up so the client earns interest on it. Otherwise all the "good faith deposits" are comingled with other trust funds. Interest usually is required to go to the state Bar Assn to assist people who can't afford attorneys (or some other pro bono or charitable purpose.)

You determine "large enough" based on money market interest rate and length of time the attorney will be holding funds. I opened MM accounts for holding only a few days when the deposits were millions of dollars.

[Unregistered]

advance cost for the attorney

Jon, you mentioned in your post about the advance cost, do you also keep them in a separate account?

[JON]

Advance cost

SHOULD be accounted for in a seperate account, and expenses when paid. The smaller the operation usually the worse the records. I had a several attorney law firm who had lots of computer records, but they really only cared for time and billings. At the end of the year they would look at open cases and back into the advance costs....

[BOB W]

Update....

......... Client never showed up. Hey, what are lawyers for anyway!!!!! To waste everybodys time but their's..

[veritas]

Well let's make the most of it...

A lawyer was on his cell phone, calling a locksmith.

"I locked my keys in my sports car!" said the nervous lawyer.

"No problem, I should be there in about an hour," replied the locksmith.

"Do you think you can make it a little sooner?" pleaded the lawyer. "My top is down and it?s starting to rain."

[Gretel]

......... Client never showed up. Hey, what are lawyers for anyway!!!!! To waste everybodys time but their's..

No time wasted for me. I learned something new.

[BOB W]

Yup.................

..............Yup...........