Lawyer & LLP FAQs
Answer: A COLTAF account must be reconciled at least quarterly.
Explanation: The Colorado Rules of Professional Conduct require that trust account records be reconciled at least on a quarterly basis. However, this is only a minimum requirement. COLTAF strongly encourages lawyers, LLPs, and firms to reconcile their COLTAF accounts more frequently. Monthly reconciliations are recommended, since this corresponds to the frequency at which most banks issue statements. Reconciling on a monthly basis rather than quarterly reduces the number of discrepancies that can accumulate before you investigate and resolve them. Neglecting reconcilliations for longer greatly increases the chances that you mismanage your COLTAF account—don’t take that risk!
See Colorado Rule of Professional Conduct 1.15C(c) and Colorado Licensed Legal Paraprofessional Rule of Professional Conduct 1.15C(c).
Answer: It is unethical for a lawyer, LLP, or firm to commingle their own funds with client or third-party funds. An exception applies to allow for payment of bank fees.
Explanation: While lawyers, LLPs, and firms may not generally deposit their own funds into a COLTAF account, an exception applies to allow for payment of anticipated service charges or other fees for the maintenance or operation of the COLTAF account. This includes making a required minimum deposit to open a COLTAF account. Any amount of a lawyer’s, LLP’s, or firm’s funds placed into a COLTAF account must be clearly identified in a separate ledger as part of the trust accounting records. By failing to properly record these funds in trust records, the responsible lawyer or LLP not only violates the Colorado Rules of Professional Conduct, but also risks having to forfeit the funds to COLTAF as unidentifiable funds upon the dissolution of the firm.
The Colorado Rules of Professional Conduct do not set a limit on the amount of funds that can be deposited into a COLTAF account for the purposes of covering bank service charges or fees. However, the amount must be limited to what is reasonably anticipated as necessary to cover fees and service charges. You may not deposit your own funds or the firm’s funds above what is required to cover fees in order to create a “cushion” to prevent accidental overdrafts. If you are maintaining your trust account and records ethically and are not the victim of fraud, you will not overdraft the account.
While not binding, COLTAF’s recommendation for the average practitioner is that no more than $500 should be deposited into a COLTAF account for the purpose of covering fees and service charges. Your own practice and experience may lead you to choose a different amount. However, if selecting a larger amount, consult the Colorado Rules of Professional Conduct.
See Colorado Rule of Professional Conduct 1.15B(f) or Colorado Licensed Legal Paraprofessional Rule of Professional Conduct 1.15B(f) for more information.
Answer: Fees paid in advance of services being performed by a lawyer or LLP are generally* considered the property of the client and must be held in a COLTAF or individual trust account until earned. Special considerations apply when the fee is a flat fee.
Explanation: Fees paid in advance of services must generally be held in a trust account and transferred to the firm’s operating account as earned–this applies to flat fees. However, portions of the flat fee may be considered earned at milestones in the matter. When a flat fee is charged, the terms of the fee must be communicated in writing before or within a reasonable time after commencing representation. The written terms of a flat fee must include information about whether any portion of the flat fee will be considered earned upon the completion of specific tasks or the occurrence of specific events. A form for flat fees is included in Colorado Rule of Professional Conduct 1.5 and Colorado Licensed Legal Paraprofessional Rule of Professional Conduct 1.5. Be sure to read the full rule and comments for additional context on when a flat fee may be considered earned.
Example 1: In a criminal defense matter, a lawyer and client may agree that the lawyer earns portions of the flat fee upon the lawyer’s entry of appearance, initial advisement, review of discovery, preliminary hearing, pretrial conference, disposition hearing, motions hearing, trial, and sentencing.
Example 2: In a trusts and estates matter, a lawyer and client may agree that the lawyer earns portions of the flat fee upon client consultation, legal research, completing the initial draft of testamentary documents, further client consultation, and completing the final documents.
*”Engagement retainer fees” are an exception to this rule. See Colorado Rule of Professional Conduct 1.5, Comment 16, for more information on the treatment of engagement retainer fees.
Answer: Any client or third-party funds held in connection with the practice of law in Colorado must be held in a COLTAF account, not your out-of-state IOLTA account.
Explanation: Lawyers and LLPs practicing law in Colorado are subject to the Colorado Supreme Court’s authority in regulating the practice of law and disciplining lawyers and LLPs for mishandling of funds. Therefore, when you handle client or third-party funds in connection with your practice of law in Colorado, you must hold those funds in a COLTAF account. A lawyer or LLP should use good faith judgment in determining if funds are held in connection with the practice of law in Colorado. See Colorado Rule of Professional Conduct 1.15A, comment 2.
Answer: Select an approved bank or credit union and complete our COLTAF Account Enrollment Form.
Explanation: Colorado lawyers and LLPs are only permitted to hold client and third-party funds at financial institutions approved by the Office of Attorney Regulation Counsel. You can find a list of recommended institutions here.
Once you select a bank or credit union, print out the COLTAF Account Enrollment Form and take it with you to the financial institution. The responsible lawyer or LLP will need to complete the first half of the form and the teller will complete the second half. It is extremely important that the account opening checklist on the form is completed. A teller may not skip or decline to complete any of the checklist items.
Once the account is opened and the COLTAF Account Enrollment Form has been completed, return a copy to COLTAF. Some banks will return a copy of the form as a courtesy.
Answer: No.
Explanation: A COLTAF account must only hold the funds of clients or third parties, including unearned fees, prepaid expenses, settlement funds, etc. It is professional misconduct to commingle client or third party funds with funds belonging to a lawyer, LLP, or firm.
The only funds belonging to a lawyer, LLP, or firm which may be placed into a COLTAF account are funds reasonably required to meet a minimum balance or to pay fees. Such funds must be clearly identified in the firm’s accounting records. See Colorado Rule of Professional Conduct 1.15B(b)(f) and Colorado Licensed Legal Paraprofessional Rule of Professional Conduct 1.15B(b)(f).
It is professional misconduct for a lawyer or LLP to deposit funds into a COLTAF account which are not reasonably needed to cover fees or to meet a minimum deposit requirement for the purpose of preventing overdrafts. An ethically managed COLTAF account will not overdraft and does not need a prohibited “cushion.”
Answer: No.
Explanation: It is professional misconduct for a Colorado lawyer or LLP to use a debit card to withdraw funds from a COLTAF account. See Colorado Rule of Professional Conduct 1.15C(a) and Colorado Licensed Legal Paraprofessional Rule of Professional Conduct 1.15C(a). If your bank of credit union offers to issue a debit card for your COLTAF account, decline and report this to COLTAF immediately.
Answer: Yes, under specific conditions.
Explanation: A lawyer or LLP can accept payments to their COLTAF account via debit card, credit card, eCheck, ApplePay, AndroidPay, PayPal, Venmo, etc. However, because of ethical considerations applicable to lawyers and LLPs, you must use a specialized vendor for card payment processing. Card payment processors serving lawyers or LLPs must ensure that payments of earned fees are directed to the firm’s operating account, while unearned fees and other client and third-party funds are directed to the COLTAF account. It is also imperative that the card payment processor is capable of preventing chargebacks against the COLTAF account.
While COLTAF does not endorse any card payment processing vendors, the list below may be helpful in your search for a payment processor. If you use a practice management software, you may want to contact your practice management software provider to inquire about integration capabilities. Lawyers and LLPs are responsible for conducting their own evaluation of which payment processors offer adequate security and ethics compliance.