Client trust funds are a potential source of contention in any legal specialty, and real estate law is no exception. Ann Irons, an experienced CPA who offers escrow accounting in Bellingham, MA, shares tips for avoiding costly trust account violations.
Seek to Understand, Not Assume
Discuss trust accounting procedures and requirements in detail with clients and support staff. This step is especially important in cases where the funds must stay on deposit for an unusually or unexpectedly long time. Inform your clients that proceeds from their settlement cannot be disbursed before the check clears. When working with a substantial settlement amount, go over the advantages and disadvantages of interest-bearing accounts. If such an account is present, outline the process by which your client can expect to receive funds generated from interest.
Avoid Situations That Invite Ethical Dilemmas
It’s easy to say that you, personally, would never act unethically. More difficult is saying that no one in your practice would do the same. The best way to avoid the wrong answer to a question of ethics is to prevent situations that raise the question. Borrowing any amount of money, regardless of its intended use or immediacy of repayment, should be avoided at all costs. Other problematic practices include retention of unearned advance fees, using clients’ funds as leverage for earnings that have been disputed, and taking money from a client’s account as payment for that client’s bills.
Create a Paper Trail for Payments
A system of checks and balances is needed to ensure the legitimacy and legality of any negotiations on trust accounts. For example, you might instate a policy in which two signatures are required to make disbursements from an account; at least one of these signatures should be that of an attorney. In a solo practice, the attorney’s signature should be required on every single disbursement. Another employee should verify the disbursement before it is made.
Questions about escrow accounting in Bellingham, MA? To learn more about taxes and accounting for real estate lawyers, or to schedule an appointment with Ann Irons, CPA, LLC, contact us at (508) 966-0700. We welcome individuals, businesses, and attorneys in Bellingham, Woonsocket, Boston, Medway, and the surrounding areas.
Ann spent over 25 years in the financial service industry, gaining knowledge and experience that allows her to provide an array of tax, bookkeeping, and accounting services for her clients. Relying on a stringent code of ethics and a dedication to maintaining the highest industry standards, Ann works hard to ensure her clients receive the quality service they’ve come to expect. A member of AICPA and MSCPA, Ann has also had an article featured in the renowned publication, Banker and Tradesman. 
