How errors in trust accounts endanger the professional licenses of attorneys

When an attorney is hired on retainer, they are supposed to put the money paid by the client up front into a trust account—often an Interest on Lawyers Trusts Account (IOLTA) that pays interest on the funds into legal aid organizations such as the Texas Access to Justice Foundation.
The attorneys may then pay themselves out of the account based on hours worked. But sometimes attorneys are unaware of just how careful they need to be when dealing with such trust accounts—and how easily an unintentional error in so doing may come to threaten their license to practice law. These errors tend to come in a few major types.

  • Not keeping detailed track of the funds. Every client’s trust account transactions must be carefully recorded. Every check should include the file number and name of the client when it is issued, and the reason for the check’s issuance should be documented. The bar association requires attorneys to keep records showing how much money is in each client’s trust, and the tracking of the funds must be clear—in order to keep money from one client’s fund from being spent on another client’s case. And every attorney should be sure that their trust accounts are balanced at the end of every month, checking carefully for accounting errors.
  • Borrowing money from trust accounts. This simply must not be done, because there is no way to do so legitimately. Funds cannot be taken from these trusts before the attorney has a right—via hours worked—to do so. It doesn’t matter if the firm is having income problems. And even if this action is taken by a paralegal or firm bookkeeper, the attorney’s license is on the hook for it—another reason to be sure to balance the accounts at the end of every month.
  • Commingling funds. This can arise from confusion about what should and what should not go into a trust account. The rule is that funds paid on retainer must be at least channeled through the fund, even if the attorney is rightfully entitled to payment immediately. No attorney should be using the trust account as though it were a savings account or operating account—and expenses such as office overhead should never be written directly out of the trust account, even if the funds have already been earned. The firm should be paid first, then the money spent appropriately.

If you’ve made an error in managing a trust account and your license is in danger of being revoked, you’ll want an experienced professional license attorney at your side to reduce the likelihood of losing your livelihood.

Professional License Defense Attorneys

BERTOLINO LLP handles matters related to licensure, grievance complaints, ethics, and other important professional licensing issues. If you have received a licensing complaint, BERTOLINO LLP can help. To best serve our clients we have offices in Austin, Houston, and San Antonio.
Contact us today or call (512) 476-5757 and schedule a case evaluation.

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