The Shely Firm

ETHICS TIPS - SUMMER 2009:

• Trust Account Random Audits!

The Arizona Supreme Court authorized Random Examinations of Law Firm Trust Accounts as of January, 2009. The State Bar is still drafting procedures for the “examinations” but they are expected to begin in 2010. Review Arizona Supreme Court Rule 43 for the specific requirements – especially the documents that must be maintained for the trust account. Here are three quick tips:

a. The Trust Account must be reconciled three ways every single month, which means that the bank statement is compared to the trust account register (where all transactions on the trust account are listed) and those two documents are then reconciled against the total of the individual client ledgers. For a sample three-way reconciliation form, check out page 85 of the Bar Directory!

b. Keep all documents related to the trust account including bank statements, duplicate deposit slips, cancelled checks, records of wire transfers, copies of the client ledgers (including the ledger for “firm money” that is in trust), the trust account register, and copies of the reconciliations - Supreme Court Rule 43 requires that the records be maintained for five years from the conclusion of the representation but realistically – keep the records forever. Most likely these will be the documents the State Bar will request in a random audit.

c. Keep the trust account register current, with a balance for each entry.

If you have questions about whether your firm trust account is in compliance with the Rule, contact Lynda Shely for a review.

• Credit Card Payments Into Trust – Yes You Can.

Arizona Ethics Opinion 08-01 held that law firms may not take credit card payments that go into a trust account because of the concern that a credit card company can reach into a trust account and “charge back” the money…even if the money no longer is in trust.

Due to the significant outcry from Bar members when this Opinion issued, the State Bar submitted a proposed Rule change that was approved by the Arizona Supreme Court, effective January 1, 2009, that permits law firms to take credit card payments for money that must go into trust - as long as:

1. You make sure that only advance fees go into trust, not earned fees.

2. You confirm with your client that they have consulted with their credit card company and the company permits payments for services that have not yet been performed.

3. You request that your financial institution only withdraw credit card fees and charge backs from your operating account, even if the original deposit went into trust.

4. If the bank “forgets” their agreement and does a charge back on your trust account, you have three business days to cover that withdrawal (make a deposit from your operating account to your trust account), so that the credit card company is not taking some other client’s money from trust.

For the complete text of the amendments to Ethical Rule 1.15 and Supreme Court Rule 43 on credit cards, see: www.supreme.state.az.us/rules/2008 Rules a/R-08-0030.pdf

The information on this website is intended to be informational only and does not establish an attorney/client relationship, nor is it meant to be legal advice for a specific matter. Please do not email or fax information to Lynda without first speaking or meeting with her because the information may not be kept confidential nor will it establish an attorney/client relationship. Lynda is admitted to practice only in Arizona, the District of Columbia (inactive) and Pennsylvania. The Shely Firm address is: 6501 E. Greenway Parkway, Suite 103-406, Scottsdale, Arizona 85254.
© 2008 The Shely Firm, PC