Trust accounts are one of those back-office topics that can feel “administrative” until something goes wrong. Then it becomes urgent. In a recent discussion, Knight Lancaster, attorney and CPA, shared the biggest trust-account risks he sees in growing law firms, plus the workflows that help firms stay compliant, consistent, and calm.
If you handle contingency matters, settlements, or client funds of any kind, this is worth reading. A few small habits can prevent big headaches later.
1) Assign one person to own the trust account, fully
Knight’s first recommendation is simple and surprisingly powerful: one person must be directly responsible for the trust account.
You need one person directly responsible and on point for your trust accounts.
He warns that a “team approach” with multiple people pitching in, or multiple hands in the pot, becomes harder to track as the firm grows. What feels flexible at a small firm can turn into confusion at scale.
- One owner improves accountability
- Clear roles reduce errors and rework
- Consistent handling makes reporting and reconciliation easier
2) Avoid two high-risk trust mistakes during settlements
Knight highlighted two practices that create serious risk for law firms, especially during settlement disbursements.
Risk #1: Cutting trust checks while funds are still pending
He notes that some firms cut trust checks from settlements while funds are still pending. That can create a major exposure if the funds have not fully cleared.
Risk #2: Pulling fees from trust before the full disbursement is ready
He also sees cases where firms pull funds from trust for fee reimbursement before completing the full disbursement. Knight’s recommendation is to avoid splitting the process.
Firms are so much better off if they would just wait until they’re fully ready to handle a settlement, with a fully complete signed disbursement sheet, as opposed to splitting it up.
The bigger message: do the settlement the right way, once, with the paperwork complete, rather than piecemeal.
3) Build a predictable settlement disbursement rhythm (10 business days works)
The conversation touched on a common rule of thumb: waiting 10 business days after a settlement check before disbursement. Knight agrees this is generally fair, with the practical note that holidays can affect timing.
But his best operational advice goes beyond the number of days. He encourages firms to set a consistent disbursement cadence, such as every other Thursday, so clients and staff know what to expect.
- Pick a consistent disbursement day (or schedule)
- Only disburse matters that settled 10 business days ago (or more)
- Use the cadence to create transparency for clients
This helps in a very real way: clients often want their settlement money immediately. A clear operational rhythm reduces stress because it gives clients a specific day instead of “tomorrow or the next day.”
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