Chapter Six: Trust Funds & Accounting Flashcards
Trust Account
A trust or escrow account is a bank account, separate from a law office’s or attorney’s business or
operating checking account, where unearned client funds are deposited.
settlement
A mutual agreement to resolve a dispute on specified terms
Funds that must be held in a client trust
- client funds
- third-party funds
- funds that belong partly to a client and partly to an attorney (such as settlement funds)
- retainers for legal services that are unearned and that are the client’s property until they are earned
Interest on Lawyers’ Trust Account (IOLTA)
An interest-bearing account set up specifically to hold trust funds. The interest that accrues on an IOLTA account is given to a state bar foundation or other nonprofit legal organization for the good of the public.
budget
A projected plan of income and expenses for a set period of time, usually a year.
income budget
Estimate of how many partners, associates, legal assistants, and others will bill for their time, what the appropriate rates of hourly charge should be, and the number of billable hours each timekeeper will be responsible for billing.
time-to-billing percentage
System of adjusting downward the actual amount that will be billed to clients during the budget process, taking into account the fact that timekeepers are not always able to bill at their optimum levels.
realization
Amount a firm actually receives in income as
opposed to the amount it bills
staffing plan
Estimate of how many employees will be hired or funded by the firm, what positions or capacities they will serve in, what positions will need to be added, what old positions will be deleted, and how much compensation each employee will receive.
zero-based budgeting system
Procedure that forces everyone in the
organization to justify and explain his or her budget figures in depth without using prior years’ figures as justification
