No. Rule 1504(1) requires that members who receive money in trust for clients must deposit the money into a trust account within 3 business days. If you do not receive funds from, or for, clients for any reason except as payment for your billed and delivered fees and disbursements, you do not need to maintain a trust account.
The Rules do not limit the number of trust accounts one may have. Usually, members have one mixed client trust account into which retainers and other sums held for clients are to be deposited. Some firms open additional trust accounts at various different financial institutions for ease of transacting with clients. Please note that the more trust accounts that are open increases the workload of the bookkeeper as each of these trust accounts are required to be reconciled each month.
Rule 1506 states that trust accounting software must be approved prior to installation. Currently, the following programs are approved for trust accounting use:
Please note that software is approved by the Law Society based on its ability to meet our accounting rule requirements set out in Part 15. We do not approve or regulate the platform (cloud or desktop based) of the software, therefore it is up to the firm to ensure back-ups are completed, restore procedures are tested and if the software is cloud-based, that it follows the Cloud Computing Guide.
If the firm does not have a trust account (i.e. only operates a general account) the firm may use accounting software other than listed above providing the required records listed in Part 15 are still able to be maintained.
To fulfill your obligations as a trustee, as well as to avoid misunderstandings and complaints from your clients, you should ensure that all clients for whom you hold trust funds are aware that they will not receive any interest on funds held in your mixed trust account.
If a client wants interest on the trust funds you hold for that client, you must deposit that client’s funds into a separate interest bearing account in your firm’s name in trust for that client. Separate interest bearing trust accounts must be reconciled and included in the monthly trust comparison required by Rule 1524.
If you expect to hold client funds for an extended period of time and if the amount is significant you should discuss the issue of interest with the client and let the client make the decision where the funds are to be held. In these circumstances, it would be prudent to either obtain written instructions from the client or confirm the client’s instructions in writing to avoid being put in the position of financial advisor. If the client instructs you to put the funds in an interest bearing account, you should obtain the client’s Social Insurance Number or corporate number. The member should also advise the client that the T5 Income slip that will be issued by the financial institution for the interest earned on the funds is his/her responsibility and will be forwarded to the client for tax purposes.
Sharing of trust accounts increases the member’s exposure to risk and also places clients at risk of misapplications or misappropriations of trust funds by a member with whom the client may not have any solicitor/client relationship. For that reason, a member who enters into an arrangement with another member or firm to share space and/or certain common expenses but otherwise practices as an independent practitioner must open his or her own trust account in the name of his or her own firm (Rule 1504(3)).
No, only members can have signing authority for a trust account.
If you are the only member with signing authority on your trust account, it would be prudent for you to make arrangements for another insured member of the Law Society of Saskatchewan to have signing authority over your trust account(s) to allow for unexpected emergencies such as serious illness or accident as well as planned absences such as vacations. You can arrange this through your financial institution by means of a power of attorney.
No. This is an inherently unsafe practice. By signing blank trust cheques, you have effectively given control over the trust account to a non-lawyer. Arguably, you have breached your fiduciary obligation as a trustee to protect the trust.
No. If the client is providing a retainer for fees and/or disbursements for which you have not yet provided a billing, the definition of “trust funds” in Rule 1501 require that you pay the funds into your trust account. A retainer for fees and/or disbursements is money held for future legal services or disbursements on behalf of a client or for legal services performed but not yet billed. Client payments of your accounts for services rendered and billed, or reimbursement of disbursements which you have paid on behalf of the client, must be deposited directly into your general account and not your trust account.
The bank will debit your trust account to reflect the amount of the NSF cheque. This is acceptable. However, you should ensure that any service charges that result are not deducted from the trust account. As with other service charges, they should come from your general account. Ensure that you record the reversal of funds in your books and records and that there is a detailed explanation for the reversal. You need not report the transaction to the Law Society.
However, if you have drawn a trust cheque based on a client’s cheque that you learn subsequently was returned NSF, you will need to discuss the matter with the payee and arrange for a deferral of the payment or, in the event that the cheque has been negotiated, you will need to make up the funds from your own money and recoup the payment from your client within 3 business days of discovering the shortfall. The Law Society must be advised of any shortages over $1,000.00, whether or not that shortage is made up from your own funds (Rule 1526(2)). Be careful not to draw on a client’s funds in your trust account until you know the client’s cheque or credit card payment has cleared the bank.
No, trust withdrawals must not be made by a bank draft except in exceptional circumstances and only with prior written approval of the Executive Director (Rule 1514(2)). Originals of bank drafts are the property of the financial institution and will not be returned to your firm. You may never know when, or if, or by whom the bank draft is negotiated. Also, financial institutions may not retain their documents for the required 6 years. The Law Society should be contacted if this situation is encountered.
You may not use automated bank machines to withdraw or transfer funds from trust. Funds drawn from trust should only be by cheque (Rule 1514). In regard to deposits, you are allowed to deposit trust funds as long as the ATM card for the trust account is restricted to deposit only and the payor, client name and file number are recorded on the ATM slip and retained.
No, Rule 1518 states what documents are required to be printed on a monthly basis.
No. Rule 1514(1) requires all withdrawals to be made by cheque signed by a member.
Yes, as long as trust monies are deposited, within 3 business days, directly into the trust account (Rule 1504(7)). Any associated service charges are the responsibility of the member.
Yes, e-transfers can be accepted into trust providing the trust account online access remains in read/view only format and a confirmation of the deposit is prepared within 3 business days of receipt (Rule 1504(8)). If a firm intends to accept e-transfers, the member should ensure safeguards are in place to ensure the deposit is made appropriately.
You should advise the financial institution with which you deal of the regulatory requirement in this regard and ask for arrangements to be made so that you can meet the requirements of the Rules. If your financial institution cannot or will not oblige, you may have to change your financial institution in order to comply with the Rules.
If you have control of estate assets, either as an estate trustee or estate solicitor, or have control of a client’s property through the exercise of a power of attorney, you should keep proper records as you would for any trust funds, whether or not the funds are held in your trust account. (see Rule 1517 and 519).
Your obligations as a trustee and as a solicitor require that you be able to account promptly to clients or beneficiaries. When handling estate assets, it is prudent to keep the records in court passing form, listing original assets, capital receipts and disbursements, revenue receipts and disbursements, investments and compensation claimed. If you are both solicitor and estate trustee, you must distinguish between your services as solicitor and as estate trustee to avoid double charging the estate for the same services.
You must also distinguish your services as solicitor and as executor/power of attorney in determining whether it is appropriate to hold the funds in your trust account. Rule 1511 states that a member must only permit payment into, or withdrawal from a trust account, money that is directly related to legal services provided by the member or the member’s firm. This means that if you are acting as an executor and there is no legal work required then it would not be appropriate to hold any funds in your trust account. These funds should be set up in an estate account separate from your law practice.