Trust Account Management

Centerbase manages trust accounts at the matter level.  A single matter may have multiple trusts as well as retainer accounts.  This article will go over how to manage matter trust accounts, including:

1. System settings that affect trust accounting behavior
2. How to create a new matter trust account
3. How to deposit funds to the matter's trust account
4. How to apply trust funds to a bill
5. How to disburse trust funds to a vendor
6. How to refund trust funds to the client
7. How to transfer trust funds from one matter to another

1.  System default settings for managing matter trust transactions.

The settings for the system-wide default IOLTA bank account and the client retainer liability account are located in System Settings > Accounting > General > Default Trust Accounts. 

If a firm has multiple IOLTA bank accounts, the one most often used should be set.  These settings can be overridden by going to the client or matter accounting settings and changing the Default Trust Accounts there.

System Settings > Billing > General is where the default trust billing behavior is set up.

If available trust funds should be applied automatically when a bill is posted, then Automatically Apply > Trust Account should be checked.  A default Auto Trust Payment Description should be entered.  This is the line item description that will be added to the posted bill for the trust payment transaction. 

These settings can be overridden at the matter level by editing the matter's billing settings.

Uncheck the Use Default Settings and the Automatically Apply Trust box can be unchecked.

 

If an "evergreen" trust replenishment is generally required for all matters, the parameters can be set up in the general billing settings as well. 

With "Specify Trust Replenishment" checked and the minimum trust balance and replenishment level entered, when a matter's trust balance goes below the minimum established, an entry on the matter's bill will be added requesting payment to bring the trust balance back up to the replenishment level.

This system setting can also be overridden at the matter level by editing the matter's Trust and Retainers settings.

Choose the trust account to be edited.  The bank account for a matter can be changed here as long as there has not yet been trust account activity for the matter. This is also where the setting to show or not show the trust account balance on the client's bill is located.  If the Replenishment Level and Minimum Balance need to be changed, the "Use Default Settings" box must be unchecked first. 

2.  How to create a new matter trust account.

When a new matter is created, a default trust account for the matter is automatically created as well.  If an additional trust account needs to be added, it can be added in the Matter Actions > Trust and Retainer Settings area.  When adding a New Trust Account, be sure to give it a unique name, so it can be easily identified as being related to that particular matter.

3.  How to deposit funds to the matter's trust account.

Navigate to the matter to which funds will be deposited.  From Matter Actions, choose Deposit to Trust or Retainer.  On the Edit Deposit to Trust/Retainer screen, choose the correct trust account from the drop down list to indicate where the funds will be deposited.  Enter the amount of the deposit, select what type of payment was received from the drop down list and enter the name of the party from whom the funds were obtained.  When the Deposit button is clicked, the funds will be added to the matter's selected trust account.

4.  How to apply trust funds to a bill.

There are several ways to apply trust funds to a bill.  First, if the matter's billing settings are set to automatically apply available trust funds, then when a bill is posted for the matter, those funds will apply toward the balance of the bill.  Of course, this can be overridden during the posting process, if needed, by going the Apply to Bill tab, changing Auto Apply from Default Settings to Customize and unchecking the trust account.

If a matter is not set up for automatic trust application, then the funds can be manually applied by adding a payment to a posted bill.  This is the same process as adding any other payment to a bill, except that when choosing the Type from the drop down list, the trust account is chosen.  Trust accounts associated with the matter will appear with the balance of the currently available funds.

Another way to apply trust funds to posted bills is through the AR Sweep feature.  Please see this support article for detailed information and instructions regarding how to use AR Sweep.

5.  How to disburse trust funds to a vendor.

When payments need to be made on behalf of a client to a vendor, a direct disbursement from trust can be issued.  This eliminates the necessity of transferring funds from trust to the operating account in order to pay the vendor.  A disbursement from trust can be made by adding a check.  Once the check type has been set to "Trust", the associated matter can be chosen from the drop down list.  If the matter has more than one trust account, the correct account must also be chosen.  The balance in the chosen trust account will display and Centerbase will not allow a check to be written for more than that amount.  Once the check details have been entered and the check saved or printed, the funds will be deducted from the client's trust account.

6.  How to refund trust funds to the client.

At any time, when trust funds need to be refunded to the client, the same steps used for a disbursement of funds can be used, with the exception that the client will be the payee instead of a vendor. 

Transactions that affect the trust can be reviewed by going to the matter's Trust Transactions tab.

7.  How to transfer trust funds from one client's matter to another.

The Trust and Retainer Ledger page which can be opened from the Navigation Bar > Trust Account > Trust Ledger is the trust transaction action center. Most trust transactions can be initiated from this location, including:

• Deposit Funds: Add funds to a matter's trust account.
• Apply to Invoice: Initiate a payment from a matter's trust account to pay a bill.
• Disburse: Create a transaction from a matter's trust account for payments to third parties. (Use only for non-check disbursements such as wires or ACH's)
• Refund: Create a transaction from a matter's trust account to return trust funds to the client. (Use only for non-check disbursements such as wires or ACH's)
• Transfer: Create a transaction to move funds from one matter's trust account to another.

While there are other procedures in Centerbase to perform the first four actions listed above, the Trust and Retainer Ledger page is the only location where matter to matter transfers can be initiated.  This feature can be used for moving funds between a client's matter trust accounts, but it can also be used for correcting trust deposits that may have been made to the wrong client/matter account.

Choose the matter and the correct trust account from which the funds will be transferred, then the matter and correct trust account to which the funds will be transferred.  Enter the amount and a note to provide additional information regarding the reason for the transfer.  When the Transfer button is clicked, the funds will move from one matter's balance to the other's.  Both matters will show the transfer on their Trust Transactions tab.

Please reach out to support@centerbase.com if you have any questions or want further information regarding trust account management.