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Paying third parties out of a client trust account

You need to write checks directly out of the trust checking account(s) to pay legal expenses, court costs, settlements, or to subcontractors for services.

  1. Write checks for each client's costs or settlements out of the trust account for that client.

    Be sure to select the client's subaccount if applicable.

  2. Enter a description of the transaction in the check Memo field.

    Important: When writing a check, you can enter notes in two Memo fields, one on the check face and one in the detail area. When you use the check face Memo field to enter descriptions, you can see the information in checking account reports. Since it's important to keep detailed records on client trust accounts, memos help explain transactions if there is ever a client dispute or an audit.

  3. In the check detail area, select the Funds Held in Trust (other current liability) account in the Account column.

  4. Select the customer and job (client and case).

  5. If you don't print QuickBooks checks (you write them by hand), clear the To be printed checkbox and enter the check number manually at the top of the check so that it appears on reports.

In most statescases, you have to be sure that retainer or settlement checks for funds belonging to your client, and deposited in a trust account, have actually cleared the bank. Otherwise you would be using another client's money if you wrote a check out of that same trust account. Refer to your state's rules of professional and ethical conduct for handling client funds and trust accounts.

You can use reconcile in QuickBooks when you get the bank statement, or call the bank to check on a recent transaction.

See also

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