LTC trust account

Hello,

I have a question regarding trust accounts for long term care facilities, which are basically a holding account for residents' spending money. This should simply be a cash account for holding residents' deposits, and a liability account for each resident which tracks the balance of each resident's deposits. When the resident needs spending money, a withdrawal is made from the trust account, cash decreases and the liability to the resident decreases. If the account is interest bearing, the monthly interest is pro rated among the depositors, and each earns interest based on the percentage of the account that the resident owns.

We have an existing accounting software package that is basic AR, AP, GL, etc. We are trying to determine how to incorporate this into the software, whether it can somehow be accomplished in the existing software or whether to write a new module. Would anyone have an opinion on that?

Would such an account be part of the facility's balance sheet? Since there is neither ownership by nor benefit to the home, is the cash account considered an asset? Since this account contains money that is property of the facility residents and not the facility itself, is it required to report it on financial statements?

To me, it seems pretty simple, but I'm afraid that I might be missing something in the big picture. I sure don't want to hose it up for the facility.

Any comment on this situation will be deeply appreciated!

Thank you.

"dadowers" wrote

FYI: Check state laws on that, because some states prohibit interest bearing accounts in situations like these.

Hmmm......... Depends on if you can create sub-accounts or not.

You would have the asset of the bank account, and either an off-setting contra-asset account (a negative asset if you will) or the liability account. I personally would see if the asset/contra-asset accounts would please the client, as then you have the in-out line items one under the other.

The software should be able to handle the residents as vendors (and maybe you can change the title from "vendor" to "residents" to avoid confusion). If so, just be sure to point those transactions to the designated account when you set them up.

You will need a method to track their money.

Generally yes.

Yes.

Required by who? The IRS doesn't care if you didn't show what wasn't yours to begin with.

But, it is an account that was established by, and it is controlled by, the company - so it's a company asset.

As long as you properly account for the resident's money, there shouldn't be any problem.