Forming a partnership? Among the many issues partners must address is responsibility for the IOLTA account. Presumably, you and your partner or partners will use a common lawyer trust account – this would be the norm. If this is the case, follow these guidelines for proper management of your clients’ funds:
Dos for Partnership IOLTA Accounts
- Complete and submit a Notice of Enrollment if you open a new IOLTA account. If necessary, use the Notice to Financial Institutions provided by the Oregon Law Foundation.
- Each partner must individually complete the annual IOLTA certification.
- The partnership should maintain one set of records for the joint IOLTA account.
- Balance the joint IOLTA account every month when the bank statement arrives.
- A designated partner can take responsibility as the primary record keeper, including assumption of responsibility for balancing the account. Remember, however, that all partners remain accountable for client funds and all partners should review the reconciliation and trust account activity.
- If possible, arrange for overdraft or other bank notifications to be delivered to all partners in a small partnership or a partnership committee in a large partnership.
- Forming a partnership may mean that one or more partners needs to close a previous IOLTA account. If this is the case, consult the checklist for Closing an IOLTA Account available on the PLF Web site.
- All partners should know the rules and ethics opinions affecting IOLTA accounts. A good place to start is the PLF book, A Guide to Setting Up and Using Your Lawyer Trust Account, available on the PLF Web site.
Don’ts for Partnership IOLTA Accounts
- A joint account by definition requires coordination of all banking activity. You can agree to divide fees any way you like, but if the intention is to pool client funds in one bank account do not keep separate records for your individual clients. This “ostrich” approach to record keeping – where each partner keeps his or her own records – means that no partner is truly responsible for the overall activity in the joint IOLTA account. Separate records makes reconciliation difficult, if not impossible, and may allow concealment of theft, commingling, or other inappropriate activity.
- Do not delegate trust accounting to your partner without accountability. Every partner should be aware of the status of the joint IOLTA account, even if a particular partner is physically responsible for the record keeping.
- Do not allow one partner to monopolize receipt of overdraft or other bank notifications. Doing so makes it possible to conceal theft.
- Do not rely on checking the IOLTA account balance online to “verify” that sufficient funds are on deposit. This is not the same as properly reconciling the trust account and is no assurance that your IOLTA account is in good order. (Online bank balances will not reflect outstanding disbursements – such as uncashed checks – or uncredited deposits – such as credit card transactions.)
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