Why it Matters Where You Hold Your Trust Account

0 comment

Changes to The Law Society of Manitoba’s Rules on trust accounts resulted in a flurry of new trust account openings as lawyers and law firms practising in the area of real property transactions set up the restricted accounts required for the new eRegistration system at Teranet Manitoba (aka The Property Registry.) As the Letters of Direction for the newly set-up restricted trust accounts arrive in our offices, we are again paying attention to where lawyers are holding their trust accounts.

Perhaps you’ve never thought very much about why you hold your trust account where you do, but we think you really ought to because there are practical implications for the justice system and for access to justice, in particular, in Manitoba that arise from where you choose to hold that account.

Where you hold your trust account matters because the dollars banks and credit unions to the Manitoba Law Foundation fund a wide range of legal services and activities across the province. By statute, the Law Foundation’s mandate is to fund legal education, legal aid, law reform, law libraries and legal research. The Legal Profession Act requires that up to 50% of the revenues of the MLF are paid each year to Legal Aid Manitoba and up to 16.67% is paid to The Law Society. The remaining revenues, after payment of operating expenses, are disbursed in discretionary grants to organizations that fall within the Foundation’s statutory mandate. In 2017/18, more than $800,000 in discretionary grants were made to: Community Legal Education Association, Community Unemployed Help Centre, Legal Help Centre, the Faculty of Law, Legal Research Institute, E.K. Williams Library, Manitoba Law Reform Commission, Public Interest Law Centre, Pro Bono Students Canada and Legal Aid’s University Law Centre.

Where you hold your trust account matters because the interest rates paid on lawyer trust account balances can vary from one institution to another. Every financial institution has their own rate agreement with the Manitoba Law Foundation – typically paying rates of interest tied to prime rate using a “prime less” formula. During the past number of years, when prime rate was stagnant at 2.7%, the Manitoba Law Foundation would not have received any interest under those formulae, but for the negotiated floor rate agreements, in most cases at 0.25% that meant at least some interest was paid during this time period.

Where you hold your trust account matters because service and transaction charges against those accounts can be charged against interest paid to the Manitoba Law Foundation on lawyer trust account balances. Your financial institution cannot charge bank service or transaction fees to your account, but pursuant to The Legal Profession Act s.50(2) those fees can be charged against the interest paid to the Foundation. For this reason, in addition to dealing with interest and floor rates, the negotiated agreements with financial institutions set out how service fees will be charged. In some cases, no fees are charged but many institutions charge significant fees.

Where you hold your trust account can make a difference in terms of the mandatory and discretionary grants that the Manitoba Law Foundation is able to pay out each year. Higher interest rates and lower service fees mean more dollars available to the legal services and programs we fund each year.

 

Share this:

Leave a Comment

Your email address will not be published.