1. THE TROUBLE WITH TRUST ACCOUNTS
A step-by-step guide to cleaning up your IOLTA

2. 10 STEP PROCESS ADMIT (YOU HAVE AN ELEPHANT)
IDENTIFY (HOW MANY LAYERS OF THE ONION)
DIG (GATHER INFORMATION)
RECONCILE (BANK STATEMENTS TO CHECK REGISTERS)
RECTIFY (CLIENT BALANCES w/BANK BALANCE)
INVESTIGATE (WHO, WHAT, WHY, WHERE)
REISSUE & REIMBURSE (UNCLEARED CHECKS & UNDISTRIBUTED FUNDS)
REPORT (RESIDUAL OR LOST CONTACT)
REFORM (TRUST ACCOUNTING METHODS)
REPEAT (AT LEAST ONCE A YEAR)
10 STEP PROCESS
IT’S LIKE EATING AN ELEPHANT Or
PEELING AN ONION
SHOVELING SNOW IN ERIE ON CHRISTMAS
But, especially if you have had the account for a long time, the task for reconciling your IOLTA account is like eating an elephant – you just have to get started and take small bites
I admit – once you get into it – squaring up your IOLTA account can be like peeling an onion – there are layers and layers involved.
And – it can seem endless – like shoveling snow in erie on Christmas
But not to worry - I have a “simple” ten step plan for your to follow.
Just like AA’s 12 step plan – it starts with Admit!!!

3. Step #1: Admit BANK BALANCE How do you know there is a problem?
Account Ledger Balances
Identified Outstanding Transactions
BANK BALANCE
Step #1: Admit
How do you know there is a problem?

4. RECENT OUTSTANDING TRANSACTIONS
BANK BALANCE
CLIENT #1
TRUST LEDGER
CLIENT #2 TRUST LEDGER
CLIENT # 3 TRUST LEDGER
RECENT OUTSTANDING TRANSACTIONS
RETURNED FUNDS
UNCASHED CHECKS
UNRECORDED DEPOSITS
RESIDUAL?
Step #2: Identify
What is the extent of the problem?

5. Step #3: Dig Check Register Gather the information you need?
Trust Account Ledger
10 years or more?
This Photo by Unknown Author is licensed under CC BY-SA

6. Step #4: Reconcile Compare bank statement to check register
Check off cleared checks & deposits
List uncleared checks & missing transactions
Compare bank statement to check register.

7. Record discrepancies in client trust account ledgers.
Record residual funds to an unidentified client ledger.
Reissue uncleared client or escrow checks.
Reissue uncleared attorney fee checks.
Step #5: Rectify
Which client trust accounts are effected by your findings in step #4.

8. SAMPLE RECONCILED & RECTIFIED LEDGER
CLIENT
LEDGER BALANCE
PRIOR to RECTIFY
RECTIFIED
SMITH
1,000
JONES
2,000
2,500
fee check not deposited
ANDREWS
3,000
seller proceeds not clears
JOHNSON
1,500
retainer deposit not recorded
RESIDUAL
7,000
BANK BALANCE
10,000
SAMPLE RECONCILED & RECTIFIED LEDGER

9. Step #6: Research real estate escrows? unused/unearned funds?
inheritance tax retained on divested property?
balance on retainer?
property deposit?
To whom should this money belong?
refunds received?
HUD statements?
This is where the onion part comes in!
buyer or seller?
address information?
divorce escrow funds?

10. Step #7: Reissue & Reimburse
Return money to the appropriate party.
Write a letter and re write the checks or refund the escrows. Also counts as notice! Make sure to record under the appropriate trust account

11. Step #8: Report
More than likely, you will either be unable to identify or find the rightful party to whom some funds belong.
Escheat unidentified and unclaimed.

12. PA UNCLAIMED PROPERTY LAW
DORMANCY
3 YEARS
LOST CONTACT
DUE DILIGENCE
ADDRESS AVAILABLE
VALUE >$50
DAYS NOTICE REQUIREMENT
REPORTED ANNUALLY
VOLUNTARY DISCLOSURE
PA UNCLAIMED PROPERTY LAW

13. Set up and use sub-accounts within your financial system.
Reconcile to IOLTA bank statements on a monthly basis.
Use a trust account liabilities on your balance sheet to assure proper accounting.
Use a separate company & sub-accounts in QuickBooks
up-trust-account
management/quickbooks-reporting-for-client-funds- transactions/#.Wn84d-jwY2x
Step #9: Reform
Use technology to keep accounts straight going forward.

14. QUICKBOOKS IOLTA SAMPLE

15. Step #10: Repeat Audit accounts on a regular basis.
Annually submit unclaimed funds to the PA Treasury
Reconcile, reconcile, reconcile
Step #10: Repeat
Regular reconciliation of your trust ledger and IOLTA account will make it easier to keep clean records.

16. tsp@t2management.com 814-572-2294
THANK YOU