How Colorado law firms reconcile a COLTAF trust account
Colorado law firms must reconcile their COLTAF trust account every month against both the bank statement and the individual client ledgers. Doing it monthly is what turns a trust account from a compliance risk into a routine bookkeeping task.
What is a COLTAF account
A COLTAF account is a pooled trust account for client funds that are nominal in amount or held for a short time. Interest on the account goes to the Colorado Lawyer Trust Account Foundation rather than to the firm or the client.
Which funds belong in it
Client money that is not yet earned belongs in trust. Money the firm has earned belongs in the operating account, and moving it promptly is part of keeping the two separate.
Frequently asked questions
How often does a COLTAF account have to be reconciled
Monthly, against both the bank statement and the individual client ledgers. A three-way reconciliation that ties the bank balance, the book balance and the sum of the client ledgers is the standard a firm should be able to produce on request.
What happens if a trust account is overdrawn
The bank notifies regulatory counsel, and the firm should expect to explain the shortfall and show how it was corrected. An overdraft is treated as a reporting event rather than a private bookkeeping error.
