FAQs on Lawyers’ Trust Accounts
Lawyers frequently hold in trust money that belongs to clients. Trust transactions can occur in a wide variety of legal matters, including the purchase and sale of assets such as residential property or businesses, administration of estates for executors and administrators, family law and litigation settlements and more. Trust moneys also include retainers paid and held until the lawyer has the right to remove the money from trust.
Any practising lawyers who handle trust funds in Manitoba are required to maintain at least one trust account in their own name or in association with other lawyers or a law firm. Non-practising lawyers cannot maintain trust accounts.
In Manitoba, lawyers holding client trust funds are governed in their role as trustees by a Code of Professional Conduct and by The Legal Profession Act and Rules of The Law Society of Manitoba.
Lawyers opening pooled trust account are obliged to provide the financial institution where the accounts are held with directions consistent with the lawyers’ statutory obligation as trustees. Lawyers do so by providing a Letter of Direction in standard form approved by both The Law Society of Manitoba and The Manitoba Law Foundation. Directions to the financial institution include specifics as to where interest is to be remitted and the nature of the information about the account that the institution may provide to The Manitoba Law Foundation.
The obligation of the financial institution is to abide by the instructions provided by the lawyer opening the trust account.
The Manitoba Law Foundation has negotiated terms governing the payment of interest on pooled trust accounts with most financial institutions in Manitoba. Usually interest is paid on either the average monthly or daily balance at a rate tied to the Prime Rate. Some institutions deduct transactions charges, but others have agreed to waive service fees. Upon request, the Foundation will advise lawyers considering opening accounts at competing financial institutions of the rates and terms applicable at each of the institutions under consideration.
Transaction charges can never be deducted from the balance in a lawyer’s pooled trust account. While many financial institutions, by agreement with The Manitoba Law Foundation, do not deduct service or transaction charges from the interest payable on lawyers’ pooled trust accounts, some institutions do deduct transaction fees and remittance charges. Any debits for cheques printing, certification, NSF or other charges are considered a business expense and charged to the lawyer or law firm directly. These cannot be deducted from interest payments.
There can never be a negative balance in a trust account, nor can transaction charges be deducted from the interest on a different pooled trust account. Transaction charges can only be deducted from interest payable on a particular trust account.
Lawyers’ trust moneys must be held in interest-bearing accounts or eligible investments in Canadian chartered banks, trust companies, caisses populaires or credit unions.
All trust funds must be kept in interest-bearing accounts or investments. Accounts where no interest is paid, or those in which interest is not paid until the balance reaches an fixed minimum, are not eligible.