IOLTA (Trust) Accounts for Massachusetts 101
I offer up a lot of free time speaking with attorneys across Massachusetts (and sometimes beyond) who are just starting their own law firm. I don’t, by any stretch of the imagination, consider myself an expert in law firm creation or operation. But what I do offer is the benefit of my experience and mistakes. It surprises me (but I guess it shouldn’t) that when I talk to a lot of these attorneys they have no idea either what the rules are regarding IOLTA accounts or they don’t know what an IOLTA account is.
When new attorneys get sworn in to practice under the Massachusetts Bar, I believe that everyone of them should be given some form of education on law practice management including how to set up an IOLTA account.
For the record, the Boston Bar Association offers a free monthly seminar on IOLTA accounting. The problem is that not many people know about this free program.
What is an IOLTA account?
IOLTA stands for “Interest on lawyers’ trust account”. It is what is commonly referred to by attorneys as a trust account for client funds. If you have a law firm, you have to set up an IOLTA account if you take retainers or hold client funds.
An IOLTA account is set up at an IOLTA approved bank and is basically a checking account.
What is IOLTA used for?
The purpose of the IOLTA is several folds. It is a place to hold client funds before the attorney actually earns them. When you earn (bill) it, you can transfer the money from the IOLTA to your operating account. Your operating account is used for your own business use and can be used to pay anything from office supplies to salary to rent. You cannot use money from the IOLTA account for any business or personal use. The money in the IOLTA are client’s money and doesn’t belong to you at all.
Transactional practices such as real estate will use the IOLTA to temporarily hold the proceeds of a real estate sale and will use the IOLTA to disburse funds.
Another purpose of the IOLTA is to generate interest for organizations such as the MBA, BBA, LOMAP and other public services.
Can you have more than 1 IOLTA account?
Yes, you can have more than one IOLTA account and you can have more than one operating account.
What do they mean by commingling funds?
When you deposit a client’s retainer into your personal or operating account instead of the IOLTA account, that is commingling funds. You are commingling your client’s money (the retainer) with your own personal money. Remember, a retainer does not belong to you until you earn it.
The best way to avoid commingling funds, improper accounting and using your client’s money improperly is to never commingle funds. Don’t deposit any retainers into a personal or business account with the intention of moving it right away into the IOLTA. Put the money into IOLTA right away.
How do you accept credit cards with IOLTA?
There are several merchant account services that allow you to accept credit card payments. The Massachusetts Bar Association recommends (and I use it myself) a service called Affiniscape. There is also a service called LawCharge.
The main thing to remember is that you cannot use other merchant account services such as paypal or other credit card vendors. Attorney trust accounting is a lot more complicated than other merchants such as restaurants or retail shops. Since all retainers must go into IOLTA, any fees charged by credit cards must NOT be taken out of the retainer. The specific lawyer merchant accounts provides that all client funds gets deposited into IOLTA while any fees, chargebacks (credit dispute) or interest gets taken out of an operating account instead.
Are there special IOLTA rules for flat-fee cases?
If the case that you are working on is not an hourly bill case and your fees are a flat fee, then the funds do not need to be placed into IOLTA. Once the fee is paid, it can go directly into your operating account.
Where can I find out more about IOLTA accounts for Massachusetts attorneys?
For more information including a FAQ and a list of IOLTA approved financial institutions, you can visit MAIOLTA.
How much should you be earning as a new solo?
If I said $15k your first year, would you be disappointed? If I said $80k your first year, would you be overly elated? Truth is that it’s probably going to be somewhere in the middle.
How much you bring in as a solo solely depends on the rainmaker – you. If you’re good at marketing and you’re a good lawyer and you’re a good business person (yes, you have to be all of the above), then chances are, you’ll make good money and keep making better money.
It’s very hard to say the first year what you should be making but whatever you make your first year, the general consensus is that your income should double every year after until about the 5th year when it should start to plateau and level out. This is simply the average projection. You are by all means free to shatter those expectations.
Do one thing really well
I came across a cool gadget on DVICE that charges your ipod or iphone. You can see it below. It is simply a wall plug and you rest your iphone on it and uses the wall as the back cradles. So simple. No wires. No readout displays. It just charges. The thing that hit me about it is the last line:
“It’s a nice reminder that sometimes, you don’t need 50 features. Just one, elegantly executed.”
That not only applies to gadgets but also to the business of law.
You don’t need 50 areas of practice to be profitable. Just pick one or two and be really good at it.
How to comply with Massachusett’s data security law (Chapter 93H)
*Guest post by Tom Traina, Board Member of SOS. For more information on his practice, visit: http://www.geeklawyer.net
** Right click to download Attorney Traina’s powerpoint presentation
I’ve agreed to share the slides that I created for the Starting Out Solo presentation I did on data security and tools that will help lawyers comply with the new regulations promulgated under Chapter 93H.
There was some good discussion during the presentation that I feel would be helpful to people reading the slides that I will summarize now. The first matter is that, with e-mail, data security is much more difficult because a potential client who just wants to ask a question may not see a benefit in setting up a program like GPG just to ask what they think is innocent preliminary questions.
However, if two attorneys are collaborating and sharing sensitive information with each other via e-mail on a regular basis, using tools like GPG become much more important, as it is far more likely that information that needs to be protected will be shared with co-counsel. In that scenario, I cannot recommend using GPG and add-ons like FireGPG highly enough.
There was also some discussion of what the “reasonable person” standard would have to say about encrypting e-mails given lay people are unlikely to want to do so. I think it’s important to remember that when an email contains sensitive data that the client has sent you, you are still technically storing it in your e-mail account, and have all the responsibilities that that entails. The safest course of action is to ensure the email is sent and stored in an encrypted state, or remove it from the mail server as quickly as possible and store it on an encrypted file system like a TrueCrypt container.
In any case, I hope the slides provide some useful pointers for you all. If you come to SOS monthly meetings, I’ll answer any questions I can about the technical side of Chapter 93H compliance.
-Tom Traina
GeekLawyer.Net
How to hire a receptionist for $50/month
*This article appeared in the MBA Lawyer e-Journal: Tip of the week on 11/12/2009
You read that correctly. You can hire a receptionist for $50 a month ― sort of.
I recently moved to a new office and added three additional telephone lines to my practice. My intention was that each line be dedicated to a specific language. The next step was to hire a receptionist who could speak at least three languages. Turns out, trilingual receptionists, who know how to use Quickbooks and can fill out divorce filings, are rare.
So the next best thing is a PBX system. No doubt you’ve encountered one when calling for technical support or a customer service line. It usually goes something like “Thank you for calling [name of company]. Press “1” to speak to sales. Press “2” to continue holding indefinitely.” Unfortunately PBX systems are thousands of dollars and require a hardware hookup to your existing telephone system. Lucky for us, there are virtual PBX systems online.
Companies such as Onebox.com or VirtualPBX.com provide the same exact service as a PBX system with none of the physical hardware or upfront costs. You can forward or port a line directly to the service provider ― and for $50 a month ― an auto-attendant (or machine receptionist) will answer and direct your calls to whatever line you instruct it. It can go to any office phone or your cell phone or to voicemail.
That’s how you hire a receptionist for $50 a month ― sort of.
This tip is courtesy of Gabriel Cheong, attorney at law, owner of Infinity Law Group.
Marketing Using Twitter
* This article appeared in the MBA Lawyers’ e-Journal: Tip of the Week on 11/5/2009.
Twitter was the “it” kid on the block when it got started and up until this year. Then statistics came out that pointed to the fact that most Twitter accounts registered were NOT being used on a regular basis and a majority of the “tweets” come from a minority of tweeters (Twitter lingo). Add to that, many legal business and marketing gurus didn’t know exactly how Twitter could help market a law firm and if they did make a claim that it was beneficial, they didn’t have hard numbers to prove it.
Then last month, Google and Bing revitalized Twitter as a marketing tool. In their usual epic battle of Microsoft vs. Google, Microsoft’s new Bing search engine struck a deal with Twitter to start indexing their site. In the same day, Google made the same announcement that it will now start to index Twitter.
What does that all mean for legal marketing?
It means that individual tweets can now show up as searches in Google or Bing. So if you tweet something about your particular substantive area of law, there is a possibility that it will get picked up by Google and Bing and if relevant enough to a user’s search terms, it will show in the search results.
If you haven’t started using twitter yet, now is as good a time as any to start and I predict that many more firms will start to see direct results from their twittering over time. Tweet about your practice or the law. Tweet your blog posts. Retweet other interesting posts. Just start tweeting.
This tip is courtesy of Gabriel Cheong, attorney at law, owner of Infinity Law Group. Follow Gabriel on Twitter @GabrielCheong.
A Little Bit of Southern Hospitality
*This article appeared in Mass Bar Lawyer’s e-Journal – Tip of the Week: 10/22/2009
A little bit of southern hospitality
I recently met with an opposing party for a divorce case who was raised in Texas, and what surprised me was that he was extremely polite. After giving the client bad news, he says to me, “Yes sir, I understand. Thank you for telling me.” I was floored.
After the meeting, I was reminded of one of my law school internships. The owner would say, “Good night” and “Thank you” to every employee, whether it was the secretary or an associate, when they left for the day. It was just two simple words―thank you―and it made all the difference. I still remember it because it made me feel good. It made me feel as if my day and my efforts were appreciated and it contributed to making the boss’s day better.
This also translates to better client relations as well. Treating your clients with respect and understanding them, even when what they’re saying doesn’t make sense or you don’t agree with them, will foster a better and more respectful relationship between you and your clients. And when your representation is over, why not give them a call (in addition to the closing letter) to tell them you appreciate their business and to thank them. It’ll make them feel good and it’ll also make you feel good.
Thank you for reading.
This tip is courtesy of Gabriel Cheong, member of Starting out Solo.
Fostering imagination in staff relations and marketing
*This article appeared in Mass Bar Lawyer’s e-Journal – Tip of the Week: 10/15/2009
“I’ve heard it said that people come into our lives for a reason bringing something we must learn and we are led to those who help us most to grow if we let them…and we help them in return.” – For Good, from the musical Wicked.
Great firms have learned to empower employees to provide constructive criticism and use their imagination to create a better, stronger more profitable firm. Yes, self-evaluation and imagination is needed to run a successful law firm. These tools allow us to think outside the box in terms of business development and new ways of marketing. Because when it comes to the marketing game, you can’t simply imitate what other attorneys are doing because then you’d just be like everyone else―indistinguishable and ordinary. Take old ideas and improve upon them and to do that, you need to stop and critique what is being done and use imagination to move forward. And the old adage that two heads are better than one applies. Make every member of your staff feel like they have the freedom to come to you and express themselves and to offer suggestions. Don’t create an atmosphere where your employees are afraid to voice an opinion that differs from your own. Don’t limit employees’ social media use because you’re afraid of what they might say. Instead of being seen as the one who can fire them, be the one who can listen and incorporate their ideas. Your employees should work with you instead of for you to achieve a common goal of a successful, profitable and enjoyable firm.
This tip is courtesy of Gabriel Cheong, attorney at law, owner of Infinity Law Group.