A 26- vehicle accident took place in 2017 that resulted in 13 people suffering injuries and the death of a teenager. Four years later, in 2021, a jury awarded nearly $1 billion in damages against the liable trucking companies. This sounds like a lot of money, but the injured parties don’t simply walk away with a briefcase full of cash. The amount awarded typically goes into an attorney trust account.
Understanding how a trust account works can help you better understand the legal process and what to expect when a lawyer manages your money for you.
Key Features of an Attorney Trust Account
A lawyer has a fiduciary duty to look out for their client’s best interests. They act as a representative, and as a part of this role, they could receive money on behalf of the client. A lawyer should never comingle their law firm’s funds with their client’s. They will also maintain complete and accurate accounting records for the trust account. As the client, you can ask at any time to see the trust account’s ledger. At a minimum, your lawyer will send a yearly account statement updating you on the status of the trust.
There are Different Types of Attorney Trust Accounts
Depending on what you and your attorney need to do, there are different types of trust accounts. While they serve different purposes, they all function similar manner.
Retainer
Some lawyers require you to pay a retainer when you hire them. This is a sum of money that acts as a security deposit. The lawyer will put this money in a separate account and pull from it as they bill the client for services rendered. Then, as the client, you will receive a statement outlining the fees charged and the amount deducted from the trust.
Escrow Account
This temporary trust account holds money for two parties while they complete a contract agreement. Typically, this type of trust account is used during the sale and purchase of real estate. A mortgage company will also use it to hold money designated to pay a borrower’s property taxes and homeowners’ insurance.
Revocable Living Trust
This type of trust is used during estate planning. Creating this type of trust prevents the assets from going through probate, which results in faster distribution to the beneficiaries. It can also help avoid additional costs that can be incurred during the probate process. In addition, using a trust can help keep the contents private, where a will and probate terms become a part of the public record.
Inheritance Trust
This is another type of estate planning trust. It’s typically used when someone inherits a large amount of money either from a will or insurance payout. A trustee will manage the trust and ensure the assets in the trust are used in accordance with the terms of the trust. This prevents the beneficiary from spending all of the assets too quickly or irresponsibly.
Personal Injury Trust
If a client receives an award for a personal injury claim, the payout can be placed in a trust account. This is typically done when the payout is a significant amount. First, the defendant in the case will make payment to the trust account. Then a trustee will manage the performance and disbursement of the funds.
Setting Up Your Trust Account
A lawyer can help you set up your trust account. They will prepare the appropriate paperwork and submit the required filings. Next, you will need to decide who the beneficiary or beneficiaries will be. It is smart to appoint a trustee who will actively manage the account. Finally, you will need to decide which assets you will place in the trust as the assets.
Work With a Lawyer to Set Up Your Trust Account
If you have a sum of money that you need to hold in a special account for a specific purpose, you may need a trust account. A skilled and reputable attorney will help you set up and manage your trust account. Discuss with your lawyer the purpose of you forming a trust, who you want to be the beneficiary, and what assets you’d like to place in the trust.
Request a consultation and get started forming your trust with one of our skilled attorneys.
