ALL ABOUT ATTORNEY PAYMASTERS

* If you need the services of a paymaster or just want to know more about paymasters, contact Attorney Jay Menes at [email protected]

Who Is a Paymaster?

A paymaster is someone who is engaged to receive, hold, and distribute funds, commissions, fees, sales proceeds, loan, or other valuables to beneficiaries. Often in project funding or sales transaction involving large amounts, the paymaster receives the funds into his escrow account and distributes them to the beneficiaries according to specific instructions. For instance, in a sales transaction, the buyer and seller often require a paymaster to handle all incoming and outgoing funds. Also, because most banks prefer not to be responsible to distribute large sums in a transaction, they often require the parties to appoint a paymaster.

Who Can Serve As Paymaster?

Generally, a paymaster does not need to have any type of license. The primary requirement is that he must be a neutral third party who is not involved in the underlying transaction. However, due to the fiduciary and security and safety issues involved in the paymaster service, it is usually better to appoint a lawyer as a paymaster. In the United States, most lawyers use their IOLTA Accounts to provide paymaster services. In these instances, the paymaster is often called Attorney Paymaster.

What is an IOLTA Account?

IOLTA stands for Interest on Lawyers' Trust Accounts. Lawyers in the United States use this type of trust account to ensure that they ethically and responsibly hold funds belonging to their clients and other people. By law, United States lawyers must establish IOLTA accounts in which they will hold funds for clients or other parties. These funds do not belong to the lawyer and he/she is prohibited by law from disbursing the funds except as directed by his client.

What is the Role of the State Bar as to IOLTA Accounts?

IOLTA accounts are directly linked to the State Bar which also monitors to make sure that the lawyer is complying with the law in regards to the IOLTA. Statements from the account are also sent by the bank to the State Bar to ensure that the State Bar is seeing how the account is being used. Interests earned from the IOLTA account are remitted to the State Bar and are used to support legal aid programs and other public service initiatives. These interest payments help fund improvements in legal representation and social justice initiatives that strengthen communities across the United States.

Why Use an Attorney Paymaster?

As already mentioned, paymasters are generally not required to be licensed. So, the question that often comes to mind is: Why should you use an Attorney Paymaster, rather than a non-attorney paymaster? The simple answer to this question is that Attorney Paymasters provide you security and assurance. This is because Attorney Paymasters are strictly regulated by their respective State Bars, and are required by law to deposit your funds into their IOLTA Accounts. These accounts are directly linked to the State Bar and are strictly monitored by the State Bar. The State Bar receives monthly statements from the accounts, and is like the Eagle Eye in the Sky watching to make sure that a rouge attorney paymaster does not misuse or misappropriate your funds. By law, the attorney must keep the funds in the IOLTA Account, and must disburse it exactly when and how you direct him to. Indeed, misuse or misappropriation of IOLTA funds is the fastest route for a lawyer to be disbarred and lose his/her license. But in contrast, a non-attorney paymaster is simply an unregulated individual or entity. He could be anyone! The only assurance you have that he (or the entity) will not misuse or misappropriate your funds is his contractual word! In other words, you are entrusting your funds to an individual solely based on a promise they made in a piece of paper. With an Attorney Paymaster, you get a regulated contractual promise backed by the Eagle Eye monitoring and management of the State Bar. Moreover, the paymaster fee is generally the same with both attorney and non-attorney paymasters. If you need the services of a paymaster or just want to know more about paymasters, contact Attorney Jay Menes at [email protected]

What Documentation is Required by the Attorney Paymaster?

Generally, the Attorney Paymaster must ensure compliance with relevant laws such as Anti Money Laundry laws, the Patriot Act, anti-terrorism laws, etc. The lawyer must ensure that the funds are coming from non-criminal sources and will be used for non-criminal purposes. This will require sufficient documents and information regarding the underlying transaction or project, as well as sufficient information on the client and all persons/entities involved. In addition, the lawyer may also provide his firm’s CIS to the client and others involved.

How Does Attorney Paymaster Services Benefit Clients

Attorney Paymaster services give clients the peace of mind in knowing that their funds are held in a secure place. The lawyer serves as a fiduciary trustee to assist clients in transactions and projects. Because the IOLTA Account is monitored by the State Bar, the client is confident that the funds will be disbursed only as directed. Moreover, the interest generated from the IOLTA Account is pooled to support legal aid programs to benefit indigent parties within the legal system. In this way, clients indirectly contribute to ensuring equitable access to justice for all.

How is the Attorney Paymaster Compensated?

The Attorney Paymaster charges a small fee for the services. This fee is paid directly from the funds in the IOLTA Account.

**If you need the services of a paymaster or just want to know more about paymasters, contact Attorney Jay Menes at [email protected]

***Information in above article is strictly for educational purposes and is not legal advice or substitute for legal advice.