Trust Accounts

Old trust balances are a beast. Nobody likes dealing with them. They take time away from productive activities. It is frustrating to “get your head back into” an old file only to discover you can’t find the client or something is missing which prevents an easy solution.

In an ideal world, lawyer trust accounts would not hold any funds older than a year. The world is not ideal, and things happen; however, every firm should have a process for limiting your exposure by eliminating old balances.

Further, each individual lawyer in a firm is now required to pay out money held in a trust account as soon as practicable upon completion of the legal services to which the money relates (Regulations 10.2.9.1 and 10.2.9.2).

Old trust balances are funds held in trust for which the purpose of the trust cannot be fulfilled for some reason. The risk to you or your client is elevated by virtue of the passage of time.

You should devote time to examining and clearing them quickly before it gets harder to do so or a problem develops. Old balances include, but are not limited to:

Funds held back for recording a mortgage release (more than 180 days from the closing date of the transaction).

• Escrow funds where the terms of escrow have not been fulfilled upon completion of the legal services.
• Builder’s Lien holdbacks that have not yet been paid into court after an undischarged lien was filed and you have completed the legal services for the client.
• Any funds for filing, registering or recording a document that is in your possession or control but have failed to file, register or record.
• Funds held back for CRA liabilities where no steps have been taken to determine the balance owing to CRA.
• Retainer funds for a client with whom the law firm has lost contact
• Any funds due to a client that has not been disbursed in a timely manner.

Old balances are a risk and problematic for you and for your client(s):

• You can only pay into or withdraw from a trust account money related to legal services that you or your firm is providing. Further, you must pay out trust money as soon as practicable upon completion of legal services. If you have old balances, chances are that legal services have long been completed.
• An account holding old trust funds is a known temptation for theft: for lawyers, staff and bank staff. You leave yourself vulnerable. You must be aware that if a staff member steals trust money, the loss is unlikely to be covered by the Lawyers’ Fund for Client Compensation and is not insured through LIANS. You will be responsible for the loss unless you have purchased specific insurance for this purpose.
• The funds probably belong to someone, not the firm or the lawyer.
• Human nature: you are less likely to pay attention to old balances as time passes. This prevents you from closing your file and makes it harder to deal with later because you forget things.
• If you are suddenly unable to practice due to suspension, disability or death, old balances are very difficult for a successor in practice to resolve.
• They are a serious barrier for your retirement from the practice of law, especially for solo and small firms: nobody else will want to deal with old balances, so finding a successor may be difficult, if not impossible.
• They are an administrative burden – old balances cost you money, time, and stress.

While it seems like an easy solution, and maybe even a fair one if you’ve been put through a lot of trouble, it usually is not the right way to resolve an old trust balance.
It is appropriate to bill from an old balance only when:

• There is unbilled legal work or a disbursement, and
• That work or disbursement is within the scope of the original retainer, and
• The funds are a retainer, not held for a specific purpose like a holdback or recording fee.
  
  • Example 1: your retainer letter/agreement covers postage and bank charges, and the fact the client is unresponsive leads to postage or bank charges not previously captured by a set fee for such disbursements.
  • Example 2: client agreed to pay postage, the balance in trust is 92 cents or less. Send them a letter and bill for the postage for that letter, because 92 cents is the current cost of a stamp in a book. Even if the letter is returned, you acted reasonably. Write-off any balance.
• Any time that a client is billed, the invoice, outlining the work performed, must be sent to the client. If a lawyer were to generate an invoice and withdraw the funds without sending the invoice to the client, this is equivalent to misappropriating client money.
  
  It is inappropriate to bill from an old balance for:
• An additional fee for administration or lawyer time related to holding the money (e.g. an additional file administration charge or the lawyer’s hourly charge related to time spent dealing with the old balance). Law firms are not banks; don’t charge fees for holding money.
  • Example: Balance in trust is $10.00. All the legal work was completed and billed earlier. Don’t send a bill for $10.00.

Your approach to old balances should be systematic. Once it is no longer reasonable to try to return the funds to the client, you should pay those funds out through the next Undistributed Trust Funds Application made by the Society. This is the reason that the Society makes these applications: they provide an easy, cost-effective and appropriate way to clear old balances.

Here are some tips to eliminate and prevent old balances:

• Someone at your firm should review trust balances regularly, file by file.
  • Make sure there is action since the last review.
  • Review every balance older than a year, moving to six months as you work through any older balances.
• All partners should take diligent interest in old and/or large balances, for their own protection. It is recommended to print trust listings, sorted by lawyer. These listings should be signed by the responsible lawyer and reviewed by the Designated Lawyer on a periodic basis.
• It is recommended that the file of any lawyer with an old or large balance be reviewed by a different partner.
• Set goals and targets for all lawyers; Remind lawyers of their responsibility to pay out trust money as soon as practicable upon completion of legal services.
• Funds that can be returned to clients should be, asap.
• If funds cannot be returned to the client asap, develop an appropriate alternative action, such as:
  • escalate pursuant to the mortgage release protocol
  • inclusion in the next Undistributed Trust Funds Application
  • payment into court
  • using a financial institution as an escrow agent
• Follow up to make sure the action has happened.

Here are some general tips:

• If your firm is still unable to make headway on addressing old balances, consider any staffing issues you may have. Consider hiring additional staff to support the firm’s ability to fully complete files.
• When possible, prevent trivial balances accumulating in your trust account. Before a final disbursement is made, review a copy of the client ledger card (history of client transactions). Is there a rounding error that may result in a trivial amount being left in the client account?Is a lawyer joining or leaving your firm? What is the firm’s policy on handling any balances left behind? These balances may become an unnecessary administrative burden/liability for the firm. Although the departing lawyer has an ethical responsibility to address these balances, it is the law firm (via the Designated Lawyer) who the Society will be following up with to address the issue. The Society has seen this issue happen time and time again – in particular for balances left behind by retiring lawyers. If a lawyer is joining your firm, consider the types of balances they wish to deposit into your trust account. Is there a plan of action for each balance? Will this balance become an unnecessary administrative burden/liability to the firm?
• Do not get into a cycle of stale dated cheques. If a cheque has become (or is about to become) stale, contact the client to enquire about a change of address or misplacement of the original cheque. Consider making use of the Undistributed Trust Fund Application .
• Before a cheque of $2.00 or less is issued to a client, consider asking the client if they prefer the funds to be submitted through the Undistributed Trust Fund Application .
• Although bank drafts are an acceptable form of trust account withdrawal, unless you are certain the bank draft will be negotiated by your client, do not issue a bank draft as a final attempt to clear a stale or inactive trust account balance. If the client does not negotiate the bank draft after a certain period of time, the bank will contact you to address the funds.

According to the CRA website, CRA’s assessment can take up to 120 days, assuming you provide all of the necessary documents. However, in certain situations, the CRA may need to do an audit before it issues the clearance certificate. If you have not received your certificate or a clearance certificate officer has not contacted you within 120 days, visit the CRA website to obtain contact information.

While the issuance of a clearance certificate may be outside your control, you cannot allow a holdback for this purpose to remain in trust in perpetuity. If you cannot obtain 1) any necessary assistance from your client or 2) advice from CRA, you may need to seek guidance from your insurer and/or the Society.

All lawyers have an obligation pursuant to subregulations 8.2.7 to 8.2.10 of the Legal Profession Act to record mortgage releases in a timely manner. In particular, Regulation 8.2.7 requires that you take the necessary steps to record a mortgage release in a parcel register within 180 days of the closing date of the transaction. The requirement for the timely discharge of a mortgage is further set out in Real Estate Practice Standard 3.4.

Take proactive steps if a bank or lawyer has undertaken to provide you a release but has failed to do so.  You can also look at these additional resources:

1. Section 60 of the Land Registrations Act
2. Regulations 8.2.6 to 8.2.10
3. Real Estate Practice Standard 3.4
4. Mortgage Payout Protocol practice aids and resources, and
5. Mortgage Discharge Escalation Contact List

The following information is a summary of the resources above. You can use this information to remind a colleague of their obligations or use the resources to get the release recorded yourself.

Mortgage Payouts

All lawyers have both an ethical duty and a regulatory obligation to fulfill their undertakings.

Under the Code a lawyer “must  fulfill every undertaking given”[1]  The Regulations under the Legal Professional Act require lawyers practising real estate to comply with the Real Estate Standards of Practice.[2]   

The Real Estate Standards state:

A lawyer who undertakes to record the release of a mortgage or to cancel a security interest, must take steps to ensure the removal of the security interest from the registry or parcel register in a timely manner. A lawyer who pays out, or causes to be paid out, in full or in part, a mortgage recorded in a parcel register must be aware of and comply with the Mortgage Payout Protocol.[3]

The Mortgage Payout Protocol takes advantage of the provisions of the Land Registration Act reversing the onus to lenders once a mortgage has been paid out, and requiring them to apply to court to maintain a security interest. These provisions in the Land Registration Act and the Administration Regulation allow lawyers to use a simple procedure if the lender delays in providing or recording a release after payout. The simple procedure is set out in the Regulations 8.2.7 and 8.2.8 under the Legal Professional Act.  Guidelines and tools are provided in the Mortgage Payout Protocol.

Simply put, there is no excuse for a lawyer not to fulfill an undertaking to another lawyer to ensure a mortgage is paid out and the security interest is removed from the parcel register in a timely manner. 

[1] Chapter 7.2-11

[2] Regulation 8.1.3, See also Regulations 8.2.4 to 8.2.8 regarding removing security interests from the parcel registry

[3] https://www.lians.ca/standards/real-estate-standards/part-iv-conveyancing-practice/46-undertakings

For greater certainty, a practising lawyer or law firm must not pay into the Service Nova Scotia Trust Account more money than the practising lawyer or law firm expects to be required to pay the document registration fees and deed transfer tax, if any, related to a client’s real estate transaction. It is for this reason that the Service Nova Scotia Trust Account should be drawn down to a zero balance on a frequent basis.

There are times when the firm expected to pay registration fees but it was later determined that another party has done the registration. Lawyers are allowed to remove/transfer funds from the Service Nova Scotia Trust Account back to the main General Trust Account. This is considered to be a trust to trust transfer.

A record should be maintained for all transfers of trust money between clients’ trust ledger accounts with an explanation of the purpose for which each transfer is made. If the law firm opts to use an online transfer, we recommend the use of our Electronic Transfer of Funds Form for record keeping purposes.  

Take reasonable steps to return these funds to the client.  “Reasonable” depends on the circumstances, particularly the amount involved, and the age and vulnerability of the client.  Once you have exhausted the reasonable steps, include the funds in the next Undistributed Trust Funds Application.

Here are some ideas to find clients and disburse funds to a client:

• Include a brief letter with the cheque and send to the last known address; convey that if they do not cash the cheque, the funds will likely be paid to the Public Trustee.
• If it has been a while since you have had contact with the client, try to verify the address before mailing the cheque. This will reduce the risk of the issued cheque becoming stale dated.
• Do not just mail a cheque and give up if it is uncashed or is returned to sender.
• Email and phone, if possible, before the cheque is even close to stale. Also, convey that the money will likely be paid to the Public Trustee if not cashed.
• Look in the file for helpful information such as:
• Purpose of the funds and circumstances leading to why the funds are being held
• Full name
• Previous names
• Last known contact information
• Property ownership at any given time
• Occupation
• Education
• Age
• Photograph
• Names of family members, residence, and contact information
• If their address is not current, conduct a Canada 411 search, within reason (John Smith isn’t going to search well, but John Smith Waterville might).
• Google, within reason.
• Facebook/Messenger (use Messenger to contact if you find them), within reason.
• Instagram, within reason.
• LinkedIn, within reason.
• For clients who might reasonably own NS property, POL if you subscribe.
• Use this list as a checklist (noting dates and results) to assist with any Undistributed Trust Funds Application.
• Are they snowbirds? Try to contact them again in the spring.

It’s easier to take these steps to find the client than to keep having to revisit the problem. Have tips about what works or doesn’t? Let us know at [email protected].

For any balance over approximately $100, it is recommended you go further:

• More than one letter/email is appropriate.
• Spend more time on your online searches. It is reasonable to make a greater effort for greater amounts.
• Consider contacting a third party if possible and reasonable, such as a family member, looking for contact info. Keep confidential information out of your discussion. It’s ok to say it’s good news.
• Retain the services of a skip tracer, if appropriate.
• You might check obituaries if reasonable.
• Sometimes funds are in dispute, e.g. between ex-spouses. Many disputes melt away if you are frank. Tell the parties you must apply to pay the funds into court and ask for your costs, so there will ultimately be less for division.
• You may contact the Society for guidance, especially if there is a large sum and you cannot find the client or the matter cannot be resolved.

Twice a year, the NSBS makes a court application on behalf of lawyers and law firms with undistributable trust funds to have those funds made payable to the Public Trustee.

There are three possible scenarios where funds are eligible for payment to the Public Trustee:

1. The beneficiary(ies) cannot be located or identified OR

2. The object of the trust cannot be carried out OR

3. If for any other reason it is not possible to distribute the assets of the estate or trust.

Your affidavit must provide an evidentiary basis to prove one of these scenarios.  Generally speaking, the higher the amount, the more effort you needs to put in to try and find the client and/or disburse the funds in accordance with their object. 

Once you have made reasonable efforts to return the funds to your client or disburse the funds in accordance with their object, we recommend that you prepare your affidavit while those efforts are fresh in your mind.

Information and a template affidavit are linked here.

The applications are typically made in the late fall and in the summer, but don’t wait. You can send applications to the attention of the Society’s Professional Responsibility Counsel at any time.

Please email any of your administrative questions regarding the filing of the UTFA to [email protected].

These affidavits are quite straightforward, and can easily become part of your systematic management of old trust balances. Please ensure you have reviewed the information as affidavits that include inappropriate information will be returned to you for revision.

You must enclose with your affidavit a $25.00 administration fee payable to the Nova Scotia Barristers’ Society. There is only one $25.00 administration fee – not $25.00 for each balance or affidavit submitted.

Separate affidavits are not required. You may include several clients/balances in one affidavit, or if appropriate, you may make use of an appendix.

Any balance should be disbursed in a timely manner if the matter has concluded. Please review your obligations pursuant to subregulations 10.2.9.1 and 10.2.9.2. A Trust Account Report, in the prescribed form, must be filed by March 31 of each year by all practicing lawyers or law firms operating one or more General Trust Accounts. Currently, the Society requires the report to include a separate attachment summarizing any balance held in trust for more than three years (including date, dollar amount, reason for balance, and client name/ID). Since there are relatively few situations when a balance is required to be held in a General Trust Account for more than three years, the Trust Accounts Department will perform significant follow-up on any balances in this category. Follow-up will continue until the balances are appropriately disbursed or a satisfactory explanation has been provided. Satisfactory explanations include an appropriate timeline of actions taken or estimated timeline of actions to be taken to move the balance/matter forward. A significant amount or quantity of balances held in trust for more than three years may result in additional audit procedures and/or a report to the Professional Responsibility Department.

Twice a year, the Society makes a court application on behalf of lawyers and law firms with undistributed trust funds to have those funds made payable to the Public Trustee under section 28 of the Public Trustee Act.

Funds that qualify are those:

• That have been held in trust for at least two years;
• That cannot be paid out because:
  • The beneficiary(ies) cannot be located or identified OR
  • The object of the trust cannot be carried out OR
  • If for any other reason, it is not possible to distribute the assets of the estate or trust.

• For which the client cannot be identified or contacted after reasonable efforts;
• That can be quantified; and
• That are not subject to any known conditions.

“Reasonable efforts” depends on the circumstances, particularly the dollar amount involved and the age and vulnerability of the client. 

Here are some ideas to find clients and disburse funds to a client:

• Include a brief letter with the cheque and send to the last known address; convey that if they do not cash the cheque, the funds will likely be paid to the Public Trustee.
• If it has been a while since you have had contact with the client, try to verify the address before mailing the cheque. This will reduce the risk of the issued cheque becoming stale dated.
• Do not just mail a cheque and give up if it is uncashed or is returned to sender.
• Email and phone, if possible, before the cheque is even close to stale. Also, convey that the money will likely be paid to the Public Trustee if not cashed.
• Look in the file for helpful information such as:
  • Purpose of the funds and circumstances leading to why the funds are being held
  • Full name
  • Previous names
  • Last known contact information
  • Property ownership at any given time
  • Occupation
  • Education
  • Age
  • Photograph
  • Names of family members, residence, and contact information
• If their address is not current, conduct a Canada 411 search, within reason (John Smith isn’t going to search well, but John Smith Waterville might).
• Google, within reason.
• Facebook/Messenger (use Messenger to contact if you find them), within reason.
• Instagram, within reason.
• LinkedIn, within reason.
• For clients who might reasonably own NS property, POL if you subscribe.
• For corporate clients, check the Registry of Joint Stock Companies website
• Use this list as a checklist (noting dates and results) to assist with your affidavit.
• Are they snowbirds? Try to contact them again in the spring.

For any balance over approximately $100, it is recommended you go further:

• More than one letter/email is appropriate.
• Spend more time on your online searches. It is reasonable to make a greater effort for greater amounts.
• Consider contacting a third party if possible and reasonable, such as a family member, looking for contact info. Keep confidential information out of your discussion. It’s ok to say it’s good news.
• Retain the services of a skip tracer, if appropriate.
• You might check obituaries if reasonable.
• Sometimes funds are in dispute, e.g. between ex-spouses. Many disputes melt away if you are frank. Tell the parties you must apply to pay the funds into court and ask for your costs, so there will ultimately be less for the division.
• You may contact the Society for guidance, especially if there is a large sum and you cannot find the client or the matter cannot be resolved.

To be included in the Society’s application, you need to send us an affidavit and a filing fee of $25.00.

Your affidavit must provide an evidentiary basis to prove that your application qualifies for payment to the Public Trustee. Generally, the higher the amount, the more effort you needs to put in to try to find the client and/or disburse the funds in accordance with their object. 

For Trust Funds to which one or more persons are entitled, include:

• name of the client(s)
• name of the lawyer who provided the service and received the trust funds
• balance of trust funds currently held
• date funds were received
• date funds were last dispersed, where applicable
• a statement that the funds were or appear to have been received for the provision of legal services
• efforts made by you to deliver the funds to the client(s) (i.e., state that you did Property Online or 411 searches or sent X number of letters on X dates to the client(s)’ last known address) Please note: do not include private, confidential or privileged information about the client(s), such as copies of letters sent to the client(s), trust account ledger(s), the client(s)’ last known address, a description of the legal services provided to the client(s).
• a statement that there are no conditions to which the funds are subject
• if the client entitled to the funds was a corporation, a statement as to whether the corporation still exists according to the official records of the government of the jurisdiction in which the corporation was incorporated or continued
• a statement that you wish the Court to authorize the transfer of funds belonging to (name of the client(s)), held in trust by (name of the lawyer or law firm) to the Public Trustee

For Trust Funds that cannot be attributed to any person:

• the number of unattributed funds currently held
• the date the funds were received
• the reason(s), if known, why the funds were credited to the trust account and why the funds cannot be attributed to any particular client or another person
• a statement that you wish the Court to authorize the transfer of unattributed funds held in trust by (name of lawyer or law firm) to the Public Trustee

We do have a template affidavit. Link to download template affidavit.

You must enclose with your affidavit a $25.00 administration fee payable to the Nova Scotia Barristers’ Society. There is only one $25.00 administration fee – not $25.00 for each balance or affidavit submitted.

Separate affidavits are not required. You may include several clients/balances in one affidavit, or if appropriate, you may make use of an appendix.

The Society may contact you to get clarification on your affidavit and may ask you to make revisions to your affidavit to help support the application.

The Society prepares the documentation and attends Chambers to get the  Court Order permitting the funds to be paid to the Public Trustee. We will let you know when the Order has been granted.

Once the Society has received the Order granting payment of the undistributed trust funds to the Public Trustee, the Professional Responsibility Counsel will provide you with a copy of the Order and request that you send a trust cheque in respect of the funds contained in your application to the Society, payable to the Public Trustee.

Yes. Trust accounts can be operated through electronic banking.

Yes.  Changes of process, remote working, and reduction of staff create increased risk, each of which require a unique response. Furthermore, those who are criminally minded will try to take advantage of the situation. It is important to review and discuss Anti-Money Laundering Rules with staff. Please review Client ID Documents & Resources.

Additional controls and greater staff supervision and oversight may be necessary to offset the risk. Here are some things to remember:

• Dual authorization is no longer required by the Regulations but is a recommended control.

• The Trust Account Regulations (Part 10) are the minimum requirements; each firm is responsible for putting in place the internal controls that are appropriate to their own situation.   

• Lawyers need to identify risks and develop customized control mechanisms to eliminate or manage risk.  

• Additional controls may include having a review of all trust account transactions as a standing item at regular Partners meetings.   

• A pdf copy of the client’s trust ledger card (history of client transactions) could be reviewed and electronically stamped/signed as “reviewed” by the responsible lawyer for each withdrawal transaction before it is processed.

Law firms may wish to look to their Accountants for additional guidance on appropriate internal controls based on their individual circumstances.

You must continue to document transactions, which means you need to print the confirmation screen of online transactions of withdrawals and deposits.  The confirmation needs to have the financial institution and account from which the funds were sent, the financial institution and account to which the funds were deposited (i.e. your trust account), the amount deposited, and the date and time of the transmission of funds.  If the confirmation screen does not identify the client on whose behalf the funds have been deposited/withdrawn, electronically note on the PDF the client name and/or matter number. Also, include other details such as the source of funds.

You can use the print to pdf function to create appropriate documentation.  If the banking software does not have a “print” function, take a screenshot on your Mac or Windows device.  If you use mobile banking on your phone, take the screenshot as you would normally on your phone.  Develop a system for storing electronic documents/information in a secure location so it can be easily accessed when needed.

If you are unable to meet the requirements of the regulations, you must document and report the exception in the manner outlined in Regulation 10.6. 

You can use the Electronic Transfer Authorization Form to authorize the withdrawal/transfer of trust funds.  You cannot use the Electronic Transfer Authorization Form to direct staff (who are non-members) to solely withdraw funds out of trust. This is because non-member staff access to online banking must be limited to “view only” or the office must have a system for two-person authentication already set up.  For firms with a larger staff, a three-person authentication system can be used in instances when the lawyer is not able to electronically process a transaction (signed form and two staff electronically processing the transaction). The Regulations do not restrict who may be a signatory on a lawyer’s trust account, but the lawyer must exercise professional judgment before permitting any person access to privileged or confidential client information.

Trust to trust transfers are not an issue. The lawyer may complete the transfer and send a copy of the confirmation screen to appropriate staff/bookkeeper. 

Transferring operating funds to the Service Nova Scotia Trust Account falls under subregulation 10.5.3(c) (for the Service Nova Scotia Trust Account only). Again, you can do this electronically; however, you need to need to ensure that when setting up the online banking, a non-member staff is not able to solely process trust account transactions.

Theft by an employee who is not a member of the Society is not covered by the Lawyers’ Fund for Client Compensation. The Designated Lawyer must restrict online banking access to “view only” for staff.  You need get from your bank documentation confirming that staff are restricted to “view only”. You can also view the online banking screen of an employee with “view only” access. If it appears as though the trust account could be selected in a staff member’s transaction processing screen – the staff may not have the proper restrictions. Confirm with your bank that any attempts to process a transaction will be denied.

Electronic banking allows for deposit without delay.  You need to be aware of clearing periods on funds that have been deposited electronically to ensure you do not act on funds before the funds have cleared. Every law firm needs to discuss clearance periods with their banks.

Direct deposit is an electronic transfer of funds deposited directly into the bank account of the recipient. Direct deposit replaces the need to issue payments by paper cheque. There is usually a maximum amount you can transfer using this method.

Electronic funds transfer (direct deposit) is a secure method of payment and reduces the risk of the payment being lost or stolen, and it is much less costly than issuing a paper cheque. It is also more convenient than mailing a paper cheque.

• The recipient may provide incorrect deposit information.
• The law firm may key in incorrect deposit information.
• The intended recipient may change their bank without informing the law firm.
• Costs of setting up and using direct deposit.
• Potential banking issues arising when requesting the bank to direct any electronic funds transfer fees to the general (operating) account.
• Inconvenience of requesting banking information.
• Audit trail issues. The lawyer must be mindful to print/save-to-pdf the electronic banking screen confirmation.
• Social engineering fraud. Hackers may manipulate employees into disclosing or changing banking information.

The best guidance for lawyers using electronic fund transfers is to be very careful when providing recipient account information because an error could result in a trust deficiency. If an error is made that results in a deficiency in your trust account, you have a regulatory obligation to make it up forthwith. Once you do that, for practical purposes, the client suffers no loss and would have no claim to make against the lawyer, at least not for that issue. There may be first-party property insurance coverage available in the commercial insurance market for this scenario that could provide first-party reimbursement to you in this situation. You should contact your broker or agent to discuss this. Feel free to contact LIANS for information and to answer questions you might have.

Yes, but you should exercise caution when sharing your firm’s trust account banking information. You should maintain any payment direction for audit trail purposes. It is generally unwise to provide an individual client with the law firm’s trust account banking information. It’s possible to see unexpected funds in your bank account as clients may incorrectly use this banking information when paying outstanding bills. Unknown funds in the trust account are not in compliance with trust account Regulations and present difficulties when trying to trace the source of the funds.

Be cautious of the possibility of your clients becoming victims of social engineering fraud. A fraudster could gain the trust of your client and manipulate them into transferring funds into a fake account. If you believe your client is at risk of being manipulated, the use of electronic funds transfer may not be appropriate.

Express consent is required. Electronic funds transfer (direct deposit) usually has a dollar limit. A trust cheque, bank draft, or wire transfer may be more appropriate. Wire transfers usually offer more stringent security protocols than electronic funds transfers, so if the firm is transferring a significant amount of money, a wire transfer may be more appropriate. It is wise to discuss security and holding periods for each method with your financial institution.

With caution, electronic funds transfer (direct deposit) can be used to return unused trust funds to an individual client. Regulation 10.2.9.2 Requirement for Trust Relationship, outlines that a practising lawyer must pay out money held in a trust account as soon as practicable upon completion of the legal services to which the money relates. Law firms are not allowed to hold old/stale trust account balances. Sometimes old balances arise because an individual client is unwilling to cash a paper cheque. Direct deposit provides a convenient option to disburse funds to individual clients. Direct deposit information may be collected at the beginning of the relationship to ensure any residual money held in trust can be returned to the client. To reduce errors, the firm should request a voided personal cheque. The client can obtain a personal voided cheque by contacting their bank. Any direct deposit arrangement should be documented.