Trust Accounts and Funds
1) Trust Accounts/Funds
My client has brought in $10,000 cash as part of the purchase funds for his property transaction. Can I accept this?
Rule 15 defines cash transactions and limits members to receiving or accepting cash transactions to $7,500, except in circumstances specified in rule 15.02(4).
Members are required to insist on a bank draft or certified cheque in this instance.
My personal injury client is in dire financial straits and is in need of immediate funds. Am I allowed to loan them some money which will be repaid once their settlement is received?
Members are permitted to loan money to clients in certain circumstances, however, all such loans must be approved by Benchers. Please contact the Professional Responsibility Administrator at the Law Society for the procedure and documentation to make an application to Benchers. For your reference, rule 5.11 outlines the regulatory requirements.
An error has occurred in my trust account. Do I need to report this to the Law Society?
Rule 5.05(1) sets out the reporting requirements with respect to overdrafts in a trust account. It is recommended, however, to report all irregularities with respect to your trust account to the Executive Director of the Law Society. Your correspondence will be provided to the Law Society auditor for review and placed on your firm’s trust file for inclusion in the firm’s next audit file.
What is a specific trust account and when do I need to set one up?
The Law Society Rules define a specific trust account as: “a separate deposit account or instrument in a financial institution authorized by law to receive money on deposit, maintained by a member on behalf of a specific client, and designated as a trust account on behalf of that client, into which the member deposits money received in trust, at interest that is, and is intended to remain, the property of the client.”
Essentially, specific trust accounts are set up for large amounts of funds that will be on deposit more than 30 days. The deposit account established at a financial institution in accordance with the Society’s rules must be denoted as “lawyer’s name In Trust for client’s name”. Any interest earned on the account is property of the client and should be paid to them. Additionally, any income tax due on the interest earned on a specific trust account is the responsibility of the client. The lawyer must ensure that the financial institution prepares the T5 in the name of the client.
2) Client Identification
Are there rules about client identification?
Yes. Rule XVI addresses client identification and verification. For further guidance, see the practice resources found under Client Identification and Verification.
3) Audits
I’ve been told that I need to have an audit done. Why?
Audits measure the integrity of law firm financial record-keeping requirements. A primary goal of the audit is to provide on-site guidance to help law firms correct minor deficiencies with record-keeping practices before the deficiencies lead to serious noncompliance.
What authorized the Law Society to perform an audit?
The Rules of the Law Society, rule 5.09 (1), Investigations and Audits, authorized the Executive Director and their designated auditor to perform spot audits of all records and transactions to ensure compliance with the Rules regarding trust accounts.
See Trust Accounts/Funds for more information