Tools to Ethically Manage Client Trust Accounts

Transcription

1 Tools to Ethically Manage Client Trust Accounts December 5, :00 p.m. 2:00p.m. CBA Law Center New Britain, CT CT Bar Institute Inc. CLE Credit CT: 2.0 Credits (Ethics) NY: 2.0 Credits (Ethics) No representation or warranty is made as to the accuracy of these materials. Readers should check primary sources where appropriate and use the traditional legal research techniques to make sure that the information has not been affected or changed by recent developments. Page 1 of 40

2 Lawyers Principles of Professionalism As a lawyer I must strive to make our system of justice work fairly and efficiently. In order to carry out that responsibility, not only will I comply with the letter and spirit of the disciplinary standards applicable to all lawyers, but I will also conduct myself in accordance with the following Principles of Professionalism when dealing with my client, opposing parties, their counsel, the courts and the general public. Civility and courtesy are the hallmarks of professionalism and should not be equated with weakness; I will endeavor to be courteous and civil, both in oral and in written communications; I will not knowingly make statements of fact or of law that are untrue; I will agree to reasonable requests for extensions of time or for waiver of procedural formalities when the legitimate interests of my client will not be adversely affected; I will refrain from causing unreasonable delays; I will endeavor to consult with opposing counsel before scheduling depositions and meetings and before rescheduling hearings, and I will cooperate with opposing counsel when scheduling changes are requested; When scheduled hearings or depositions have to be canceled, I will notify opposing counsel, and if appropriate, the court (or other tribunal) as early as possible; Before dates for hearings or trials are set, or if that is not feasible, immediately after such dates have been set, I will attempt to verify the availability of key participants and witnesses so that I can promptly notify the court (or other tribunal) and opposing counsel of any likely problem in that regard; I will refrain from utilizing litigation or any other course of conduct to harass the opposing party; I will refrain from engaging in excessive and abusive discovery, and I will comply with all reasonable discovery requests; In depositions and other proceedings, and in negotiations, I will conduct myself with dignity, avoid making groundless objections and refrain from engaging I acts of rudeness or disrespect; I will not serve motions and pleadings on the other party or counsel at such time or in such manner as will unfairly limit the other party s opportunity to respond; In business transactions I will not quarrel over matters of form or style, but will concentrate on matters of substance and content; I will be a vigorous and zealous advocate on behalf of my client, while recognizing, as an officer of the court, that excessive zeal may be detrimental to my client s interests as well as to the proper functioning of our system of justice; While I must consider my client s decision concerning the objectives of the representation, I nevertheless will counsel my client that a willingness to initiate or engage in settlement discussions is consistent with zealous and effective representation; Where consistent with my client's interests, I will communicate with opposing counsel in an effort to avoid litigation and to resolve litigation that has actually commenced; I will withdraw voluntarily claims or defense when it becomes apparent that they do not have merit or are superfluous; I will not file frivolous motions; I will make every effort to agree with other counsel, as early as possible, on a voluntary exchange of information and on a plan for discovery; I will attempt to resolve, by agreement, my objections to matters contained in my opponent's pleadings and discovery requests; In civil matters, I will stipulate to facts as to which there is no genuine dispute; I will endeavor to be punctual in attending court hearings, conferences, meetings and depositions; I will at all times be candid with the court and its personnel; I will remember that, in addition to commitment to my client's cause, my responsibilities as a lawyer include a devotion to the public good; I will endeavor to keep myself current in the areas in which I practice and when necessary, will associate with, or refer my client to, counsel knowledgeable in another field of practice; I will be mindful of the fact that, as a member of a self-regulating profession, it is incumbent on me to report violations by fellow lawyers as required by the Rules of Professional Conduct; I will be mindful of the need to protect the image of the legal profession in the eyes of the public and will be so guided when considering methods and content of advertising; I will be mindful that the law is a learned profession and that among its desirable goals are devotion to public service, improvement of administration of justice, and the contribution of uncompensated time and civic influence on behalf of those persons who cannot afford adequate legal assistance; I will endeavor to ensure that all persons, regardless of race, age, gender, disability, national origin, religion, sexual orientation, color, or creed receive fair and equal treatment under the law, and will always conduct myself in such a way as to promote equality and justice for all. It is understood that nothing in these Principles shall be deemed to supersede, supplement or in any way amend the Rules of Professional Conduct, alter existing standards of conduct against which lawyer conduct might be judged or become a basis for the imposition of civil liability of any kind. --Adopted by the Connecticut Bar Association House of Delegates on June 6, 1994 Page 2 of 40

3 Program Agenda 12/5/18 1. Introduction of Speakers and Goals of Program 12:00pm to 12:10pm---Stephen Conover 2. Applicable Rules of Professional Conduct 12:10pm to 12:30pm Stephen Conover 3. Implementation of the Rules 12:30pm to 12:50pm---Stephen Conover 4. Three Way Reconciliation Defined 12:50pm to 1:15pm Deborah Schaeffer 5. Requirements for software solutions 1:15pm to 1:35 Deborah Schaeffer 6. How to avoid choosing the wrong software. 1:35pm to 2:00pm Deborah Schaeffer {S } Page 3 of 40

4 Faculty Biographies Stephen J. Conover Carmody Torrance Sandak & Hennessey LLP Steve Conover helps lawyers and law firms practice law without unnecessary ethical risks. He regularly represents lawyers, law firms, and legal departments throughout Connecticut in grievance defense matters. He actively advises local and national law firms on malpractice prevention and risk management, and counsels clients on sensitive ethics, professional responsibility, and business matters. In 2007, Mr. Conover completed 11 years of service as Court-appointed Grievance Counsel involved with the State's lawyer discipline process in administrative and judicial proceedings. Since 2007 he regularly defends lawyers facing sanctions from formal Grievance Complaints filed with Connecticut s Statewide Grievance Committee. In addition, Mr. Conover provides guidance to lawyers and law firms in their management of partnership agreements, lateral hires & departures, dissolutions, licensing, and ethics compliance. CNA Insurance Company's Professional Liability claims managers regularly engage him to speak to CNA insured law firms on ethics and loss prevention topics. Mr. Conover is an experienced neutral arbitrator trained by the American Arbitration Association and regularly selected to decide complex commercial & construction disputes. He was admitted to practice in Connecticut in 1982, and since his admission has maintained an active trial practice representing clients in commercial & construction disputes in Connecticut s State and Federal Courts and in arbitration, mediation, and administrative hearings before Boards, Committees, and Commissions throughout the State. Deborah J. Schaefer Deborah J. Schaefer, CPA Deborah Schaefer is a consultant specialized in the legal market. She has been retained by law firms of all sizes, assisting with the selection, implementation, training, and support of computer-based accounting and practice management systems. Deborah assists law firms in the US and the Caribbean. Many of the consulting engagements involve determining system requirements, managing the installation of new applications, training, and support of legal accounting and practice management applications. Her services also include basic bookkeeping for law firms and business and practice management consulting. Ms. Schaefer has been self-employed for the past 35years. Prior to starting her own practice, she was employed by three of the national accounting firms. Her responsibilities included computer audits of large corporations as well as management consulting services. She was responsible for designing, programming, and implementing applications in many industries that involved asset tracking and performance measurements. Deborah is a Certified Public Accountant. Over the years Ms. Schaefer has become certified on a wide range of products for the legal industry. Currently her certifications include the following software products: PCLaw, Time Matters, Amicus, Tabs 3/Practice Master, Clio, Quicken, Xero, CosmoLex, Soluno, ActionStep, NetDocuments, and Quickbooks. Ever changing technology requires that Deborah stay current with new solutions and industry trends. Her continued dedication to the legal market makes her an invaluable resource to law firms of all sizes. Page 4 of 40

5 Tools to Ethically Manage Client Trust Accounts Connecticut Bar Association December 5, 2018 PRESENTED BY: DEBORAH J. SCHAEFER, CPA STEPHEN J. CONOVER, ESQ. CARMODY TORRANCE SANDAK & HENNESSEY LLP Page 5 of 40

6 Agenda Rules Implementation of the Rules Three Way Reconciliation Requirements for software solutions How to avoid choosing the wrong software. Page 6 of 40

7 Safekeeping Property Lawyer may hold client property in connection with representation Separate bank account must be maintained Complete records must be maintained by lawyer for period of 7 years Rule 1.15 Safekeeping Property Lawyers funds may be deposited to pay bank charges Legal fees and expenses paid in advance maybe deposited (as an option) Lawyer must notify client of all funds received Page 7 of 40

8 Further Description Lawyer may hold property of client or third party. Clients money held by an attorney Proceeds from Settlement Real Estate Closing funds Proceeds from an Estate Client Retainers (consider the option) Cost Advances Page 8 of 40

9 Rule 1.15 Safekeeping Property (con t.) Clients funds must be deposited in an interest bearing account Earnings on IOLTA not available to lawyer Lawyer determines if funds are nominal or held for a short period of time Notify clients whose funds are deposited in IOLTA IOLTA account may be established with approved financial institution Rate of interest may not be lower than the highest interest rate or dividend available from financial institution Page 9 of 40

10 Further Description (con t) May not be comingled with operating dollars Must have IOLTA Bank Account in Connecticut One per type of funds Account for firm Must have detailed records for each client Missing Clients Must have record of all transaction both receipts and disbursements Must be reconciled quarterly (best practice is to reconcile monthly) Page 10 of 40

11 Rule 1.15 Required Bookkeeping Records 7 year history required for Deposits Source, Client, Date, Description Withdrawals Date, Payee, Client, Purpose Detail records by client of all detailed activity Deposits Withdrawals Retainer and Compensation Agreements Statements to clients of accountability provided to client Lawyers invoices issued to Clients Payment records for outside legal and related services Copies of all agreements and closing statements Page 11 of 40

12 Rule 1.15 Required Bookkeeping Records Payment records for outside legal and related services Check stubs, checkbooks, bank statements, duplicate deposit slips Accurate records of all financial transactions Dissolution of a Firm Page 12 of 40

13 Implementation A good trust accounting system must have the following Check register List of all deposits Batch deposits must identify each client/matter Bank reconciliation List of Who Owns trust money Page 13 of 40

14 Implementation Must designate who owns the trust funds by client/case. Need to identify how much money each client owns in the trust fund. How the money is used. Detailed list of all transactions by bank account and by client. Physical or Electronic Records Page 14 of 40

15 Check Register Bank Account Ledger Required Reports Generated by Lawyer Deposit register Ledger for each Client\Matter Bank Reconciliation Balances by Client\Matter by bank account Page 15 of 40

16 One Write System Ledger Sheet with all receipts and checks A card for each client Possible Solutions Manual System Page 16 of 40

17 Possible Solutions Page 17 of 40

18 One Write System Page 18 of 40

19 A software solution just for trust transactions. Often seen in the Real Estate industry. Closing packages that have trust accounting built in. Check writer and bank reconciliation feature. Possible Solutions Computer Solution Page 19 of 40

20 Possible Solutions Computer Solution Billing Software for Lawyers that includes Trust Accounting Accounting and Billing Software that includes trust accounting. All in one solution Practice Management, Billing and Accounting Page 20 of 40

21 Three Way Reconciliation Trust bank balance presented in three ways Trust balance by Client Matter Chronological report of all banking transactions Bank Reconciliation Trust transactions by Client\Matter Page 21 of 40

22 Trust Fund Balance by Client and Matter Page 22 of 40

23 Trust Bank Journal- Check Register Page 23 of 40

24 Detail Trust Transactions by Matter Page 24 of 40

25 Bank Reconciliation Report Page 25 of 40

26 Controls WHAT CONTROLS PREVENT ERRORS? 1. Bank reconciliations 2. Separation of duties 3. Software controls restricting spending more money than client owns 4. Timeliness of data entry Page 26 of 40

27 Practical Considerations Who is responsible for performing trust transactions? Who will do bank reconciliations? Realistic Expectations Skill Sets Budget Financial implications Page 27 of 40

28 HOW DO LAWYERS RECOVER FROM TRUST ACCOUNTING ERRORS Satisfy all Bar Requirements Better Bookkeeping Frequent reviews Implement required record keeping Systems Page 28 of 40

29 Computer Considerations Security Virus Protection Firewalls BACK UPS Page 29 of 40

30 Selecting a Solution On Premise Hardware Technician Age of Hardware Internet Speed Network Reliability Software Applications Obsolescence Page 30 of 40

31 Selecting a Solution Cloud Software as a service Hosting Company What is a cloud Local hardware required Internet speed and Bandwidth Page 31 of 40

32 Legal Office Automation All in One Solution Practice Management Calendar Contact Management CRM Billing, Trust and Accounting Document Management Google Vs. Office Discovery Practice Specific Products Rules Based Calendaring Document Generation Page 32 of 40

33 On Premise PCLaw Tabs 3 Abacus Possible Solutions PCLaw Amicus Billing with Quickbooks accounting Orion Rippe Kingston ProLaw Coyote Analytics Page 33 of 40

34 Possible Solutions Cloud Solution Practice Management with Billing and Trust Clio Practice Panther SmokeBall RocketMatter MyCase Page 34 of 40

35 Possible Solutions All in One Cloud Solutions Soluno ActionStep Zola Suite CosmoLex BQE Core Centerbase actionstep BQE Core Page 35 of 40

36 How to choose best software Determine Requirements Reporting Functions Budget Compare Possible Solutions Select Implantation and Training Page 36 of 40

37 How to Select Determine requirements Growth Number of Users Applications required Work Flow Required Reports and Analytics Billing Considerations Payroll Credit Card Processing Document Generation Page 37 of 40

38 Compare Possible Solutions Ask Software Vendor to Demonstrate solution Ask Questions Ask to be shown how things are done Ask for References Develop Method to evaluate solutions Rank requirements Page 38 of 40

39 Quickbooks Quickbooks was written for business that buy and sell widgets not service business. Accrual vs. Cash Trust issues Accountants Love it So what??? Page 39 of 40

40 Tools to Ethically Manage Client Trust Accounts Connecticut Bar Association December 5, 2018 PRESENTED BY: DEBORAH J. SCHAEFER, CPA STEPHEN J. CONOVER, ESQ. CARMODY TORRANCE SANDAK & HENNESSEY LLP Page 40 of 40