Calculating Interest for a Trust Account

In this article:

• Reviewing and Recording Interest Rate Periods and Tiers (Admin) 
• Using the Interest Rate Calculator  
• Understanding How Interest is Calculated 

You can calculate the interest accrued throughout the lifecycle of a client’s trust account. The calculation is performed based on balances in the trust account and interest rates you’ve identified for the different rate periods the account is active.

This article covers setting up your interest rate periods, including setting up rate tiers within each period. (Tiered rates allow you to assign different interest rates to different balance ranges.) It also covers how to use the Interest Calculator.  

Reviewing and Recording Interest Rate Periods and Tiers (Admin)

An admin can add or adjust interest rate periods for specific trust accounts. They can also create rate tiers that adjust interest accrual based on account balances. 

To do this: 

1. In Actionstep, go to Admin > Trust accounting.  
2. Under Bank Accounts, find the account you want to adjust interest rates for. 
3. Click the ellipses icon and choose Configure interest rates. The page is updated to show rate periods on the left of the page with details for the selected rate period in the main area of the page. 
4. To edit an existing rate period: 
   1. Click Edit.  
   2. In the rate table that appears, make any changes you need by changing the Effective from date, by clicking the edit icon for a specific rate tier, or by clicking Add rate tier and making your changes.  
   3. Click Save to save your changes.  
5. To add a new rate period:  
   1. Click New Rate. 
   2. Enter an Effective from date. 
   3. Click the edit icon for the row in the Rate Tiers table you want to edit and enter the interest rate. (Click Update to close the window.) 
   4. Optionally, add another rate tier by clicking Add rate tier and providing the required upper balance and interest rate. (Click Create to save your updates and close the window.) 
6. Click Create to save the new rate.  

NOTE:  If you do not have any rate periods defined, you will see a page with a New Rate form. Follow the instructions in Step 5 above to complete this form.

Using the Interest Rate Calculator  

You can use the Interest Rate Calculator to determine how much interest a particular trust account has earned over a specific period.

To do this: 

1. In Actionstep, open the matter associated with the trust account. (See Editing a Matter for help.) 
2. Click the Trust Account menu icon. The Trust page appears. 
3. In the list of options on the left, click Interest calculator. The Interest Calculator appears. 
4. Click the Trust account drop-down list and choose the account you want to calculate interest for.  
5. Click the Period drop-down list and choose the timeframe you want to use for the calculation.
   
   Based on your selection, beginning and ending dates may be suggested but you can change them, if needed. Choosing Custom range allows you to enter your own beginning and ending dates.
   
   
6. Click Calculate Interest. Actionstep generates a table displaying the details of the calculation. 
7. Optionally, click Download to save a copy of the table in an Excel file. Or, if you need to make adjustments to the parameters of the calculation, click Change Calculation. 

Understanding How Interest is Calculated 

The following formula is used to calculate the interest amount for a transaction: 

Interest Amount = Balance × Daily Interest × Applicable Days 

The following example shows how this formula is used to calculate interest for a group of trust account transactions:  

One thing to note: In this example, Transaction ID 09 represents a split-rate interest transaction. To calculate the individual rates, the same interest calculation is performed, but it must be done for each interest period of the transaction: