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

• 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 Website.
• 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 Website.

Don’ts for Partnership IOLTA Accounts

• A joint account 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 in ignorance of the other – means that no one is truly responsible for the overall activity in the joint IOLTA account. Separate records make reconciliation difficult, if not impossible, and may allow concealment of theft, commingling, or other inappropriate activity.
• Don’t 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.
• Don’t allow one partner to monopolize receipt of overdraft or other bank notifications. This may be the only way to detect theft or mismanagement.
• Don’t get lulled into believing that a positive balance online is the same as real verification of sufficient funds on deposit.  Your online balance doesn’t include transactions that are “in transit,” such as uncashed checks, unposted debit charges from your eCourt account, or uncredited deposits from client credit card payments.  And it tells you absolutely nothing about whose money is in your IOLTA account.  The only way to assure yourself that your IOLTA account is in good order is to review your records and properly reconcile the trust account.

All Rights Reserved [2014] Beverly Michaelis