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May 1, 2014
Rules now require written trust account plans

By Kathy J. Bible
Bar Counsel

Bar rules now require all lawyers with more than one attorney in the firm to have a written trust account plan in place for each of the firm’s trust accounts.

The amendment to Rule 5-1.2(c), regarding required trust account records for law firms, was part of a package of amendments to the Rules Regulating The Florida Bar adopted by the Florida Supreme Court in a March 27 order. Bar members were first notified of the proposed changes when the rules petition was filed in fall 2012.

Now that the amended rule has been approved by the court, lawyers need to be ready to comply when the newly amended rules become effective June 1. The major change is the amendment to Rule 5-1.2(c), which now requires a written trust account plan for each of a firm’s trust accounts. This plan also must be disseminated to each lawyer in the firm.

According to the amended rule, the written plan must include the names of all lawyers who sign trust account checks for the law firm and review all trust account checks, the names of the lawyers who are responsible for oversight of reconciliation of the law firm’s trust account or accounts, both monthly and annually, and the names of the lawyers who are responsible for answering any questions that lawyers in the firm may have about the firm’s trust account or accounts. In a small law firm, there may be one lawyer who is responsible for all these functions. In a larger firm, these functions may initially be handled by a law firm manager or CPA, but their work must always be overseen by an attorney. For example, a law firm manager may be authorized to sign trust account checks up to a certain amount, but that person’s actions are always to be reviewed by a lawyer responsible for the trust accounts.

In such circumstances, the law firm manager or CPA’s title or position would be written in the plan along with the name of the partner or partners who are responsible for overseeing and reviewing the nonlawyers’ work. Examples of plans for both a small firm and a large firm are provided on the Bar’s website and on page 5. According to the revised rule, this written firm trust account plan must be updated and re-issued to each lawyer in the firm whenever there are material changes to the plan, such as a change in the lawyer or lawyers signing or reviewing all trust account checks and responsible for overseeing the reconciliation of the firm’s trust account or accounts.

Why Was the Rule Changed?
The reason behind this new requirement is to make each lawyer in a law firm responsible for that lawyer’s own actions regarding trust account funds.

This means that any lawyer (including a lawyer who never signs a trust account check) who has actual knowledge that the firm’s trust accounts or trust accounting procedures are not in compliance with Chapter 5 may report the noncompliance to the managing partner or managing shareholder of the firm.

If, for example, a trust account check to cover expert witness fees is returned for insufficient funds, the expert witness will be calling, wanting to be paid.

The witness is likely to call the associate who gave the expert the check, believing it to be valid. Following the amended rule, the associate should notify the firm’s managing partner or shareholder of this event.

The rule says “may notify” the managing partner or shareholder to cover the possibility that an attorney may learn that the managing partner or another lawyer responsible for the firm’s trust accounts is stealing from the law firm. It would do no good to report the theft to the thief.

However, if the lawyer with personal knowledge of the facts set forth above learns that the noncompliance has not been corrected within a reasonable time, e.g., the expert has not been paid or the expert received a second rubber check, the lawyer must report the trust account noncompliance to staff counsel for the Bar if required by Rule 4-8.3 to report it.

Rule 4-8.3(a) requires lawyers to report misconduct which “raises a substantial question as to that lawyer’s honesty, trustworthiness, or fitness as a lawyer in other respects. . . .”

Instructions for Preparing Plans
A law firm’s trust account plan, required by Rule 5-1.2, Rules Regulating The Florida Bar, should specifically name the lawyer or lawyers who are ultimately responsible for the firm’s plan or any part of it. These lawyers must be shareholders, partners, or owners of the firm. If a nonlawyer staff member is responsible for filling out a check or is authorized by the supervising partner to sign it before a lawyer reviews it, or if a CPA or office manager prepares the initial reconciliation of the trust account(s), that person’s title should be included in the plan along with the name of the lawyer who reviews that staff member or accountant’s actions and approves them. Staff members change, but the position of the person handling a particular duty is less likely to change.

A new plan must be issued when there has been a material change to the plan. Multi-national and multi-state law firms with offices in Florida should publish the plan that describes the trust accounting supervision in their particular branch office of the firm. If that branch office’s trust accounts are reviewed by a central office and a firm-wide group of lawyers, those individuals should be named in the plan as well.

Draft trust account plans for a Florida law firm are set forth below. The forms may be changed as needed as long as all the information required is in the written plan.

Trust Account Plan A is for two-person firms or other smaller firms with only one office location. The blanks should be filled in with the positions of the nonlawyers responsible for the functions described and the names of the lawyers responsible. This is an example only; each firm’s circumstances may differ.

LAW FIRM TRUST ACCOUNT PLAN FOR CALENDAR/FISCAL YEAR 20____

In compliance with Rule 5-1.2, Rules Regulating The Florida Bar, the _____________ law firm presents its trust account plan setting forth those persons responsible for maintaining and monitoring the firm’s trust account(s).

Checks: Prepared by (partner A’s assistant or office manager) and signed by _______ partner B for checks up to $10,000. As a firm policy, checks over $10,000 must be signed by both_______________ partners A and B.

Deposit Slips: Prepared by (partner A’s assistant) and reviewed by __________ partner A or B. (The name of the individual partner(s) or owner(s) responsible for the various functions must be filled in the blanks).

Electronic transfers: Prepared by (partner A’s assistant and office manager) and authorized by __________ partner A or B for electronic transfers up to $10,000. As a firm policy, electronic transfers over $10,000 must be authorized by ______________ Partners A and B.

Monthly reconciliations: Completed by (partner A’s assistant/office manager/CPA) and reviewed and approved ________partner A, majority shareholder.

Annual reconciliations: Completed by ­(partner A’s assistant, bookkeeper, office manager) and reviewed by independent CPA firm ________ , which audits the firm’s trust account annually. The annual reconciliation is reviewed and approved by both _____________ partners A and B.

Monthly client ledger card reconciliations: Completed by(partner A or partner A’s assistant, bookkeeper, office manager) and reviewed and approved by ________________ partner A, majority shareholder.

Annual client ledger card reconciliations: Completed by (office manager, bookkeeper, partner A’s assistant) and reviewed by independent CPA firm ____________, which audits the firm’s trust account annually. The annual reconciliation is reviewed and approved by both _____________ partners A and B.

Questions relating to trust accounts: Questions regarding the firm trust account should be addressed to ____________partner A, majority shareholder. If _____________ partner A cannot answer the question(s), such question(s) will be answered by both ________________ partners A and B.

Trust Account Plan B for multi-office firms with branch offices in Florida or for large firms with single offices.

LAW FIRM TRUST ACCOUNT PLAN FOR CALENDAR/FISCAL YEAR 20____

In compliance with Rule 5-1.2, Rules Regulating The Florida Bar, the _____________ law firm presents its trust account plan setting forth those lawyers responsible for maintaining and monitoring the firm’s trust account(s) in the ________(city)_________, Florida branch office of the firm. The firm is set up so that each office is responsible for its own trust accounting review and responsibility.

Checks: Prepared by (office manager, CPA, or business manager), signed by __________ partner Y, managing partner, for checks up to $10,000. Pursuant to firm policy, checks over $10,000 must be signed by_______ partners Y and Z, of the firm’s board of directors. (The name of the individual partner(s) or owner(s) responsible for the various functions must be filled in the blanks).

Deposit Slips: Prepared by (office manager, CPA, or business manager) and reviewed by____________partner Y, managing partner.
Electronic transfers: Prepared by (office manager, CPA, business manager. Y’s transfers up to $10,000. Pursuant to firm policy, electronic transfers over $10,000 must be authorized by _____________partners Y and Z, of the firm’s board of directors.

Monthly reconciliations: Completed by (office manager, CPA, or business manager) and reviewed and approved by ______________partner Y, managing partner.

Annual reconciliations: Prepared by (office manager, CPA, business manager) and reviewed by independent CPA firm A, which audits the trust account annually. The reconciliation is then reviewed and approved by the firm’s board of directors, composed of _____________________partners Y, Z and P.

Monthly client ledger card reconciliations: Prepared by (office manager, CPA, or business manager) and reviewed and approved __________ partner Y, managing partner.

Annual client ledger card reconciliations: Prepared by (office manager, CPA, or business manager) and reviewed by independent CPA firm ____(name)________ , which audits the trust account client ledger cards annually. The reconciliation is reviewed and approved by the firm’s board of directors, composed of _____________________ partners Y, Z and P.

Questions relating to trust accounts: Questions regarding the firm’s trust account(s) should be addressed to ____________partner Y, managing partner. If partner Y cannot answer the question(s), such question(s) will be addressed to and answered by the firm’s board of directors, composed of __________________ partners Y, Z and P.

These forms are guides and may be adapted to suit the style of each firm but the trust account plan must contain the information called for in these forms. If you have specific questions regarding this new rule requirement, call the Ethics Hotline at 800-235-8619 or 850-561-5780.

[Revised: 10-23-2014]