Trust Account Regulation FAQs

General

Why do these regulations matter?

It is a privilege and significant responsibility for lawyers to be permitted to hold client funds and property. The Regulations hold lawyers strictly accountable to the Society for properly dealing with all client funds and property held in trust, as part of the Society’s mandate to protect the public.

What is trust money?

Trust money is defined as:

  • money received in trust belonging in whole or in part to a client, or to be held on behalf of the client, or at the direction or order of a client or another, and
  • money advanced to a practising lawyer for fees for services not yet rendered or for disbursements not yet made (Regulation 1.1.1(cc)).

What is trust property?

Trust property is any valuable property belonging to a client, other than trust money, held by a practising lawyer in trust, or on behalf of a client or another person (Regulation 1.1.1(dd)).

Do I have to deposit all trust money or trust property I receive into a trust account?

If you received the money or property while acting in a representative capacity, then you must deposit it into a trust account. You are acting in a representative capacity if you are: 

  •  the personal representative, executor or administrator, or one of the personal representatives, executors or administrators, of the estate of a deceased person;
  •  a trustee, or one of the trustees, of a trust under an appointment made pursuant to a trust instrument creating the trust;
  •  a trustee, or one of the trustees, of the property of another person under an appointment by a court;
  •  a de facto trustee; or
  •  an attorney, or one of the attorneys, of a person under a power of attorney, whether general or special, enduring or otherwise (Regulation 10.1.2).

You do not have to deposit money or property into a trust account, or record the money or property in your financial records provided if:

  •  you maintain a record of all appointments or assumptions of a representative capacity and a list of all beneficiaries of the estate or trust, together with their last known address;
  •  the books, records, accounts and documentation of the estate or trust are in a form sufficient to accommodate an examination, review, audit or investigation ordered by the Executive Director or Complaints Investigation Committee; and
  •  the lawyer or law firm cooperates with the Society’s auditor or investigator in the conduct of any examination, review, audit or investigation so recorded (Regulation 10.1.3).

What are my responsibilities with respect to trust accounts?

You are responsible for all trust money and property received from a client. This includes:

  •  the timely deposit of trust money into a trust account;
  •  identification of the person on whose behalf the money is deposited;
  •  responsibility for all withdrawals or transfers from a trust account;
  •  maintaining accounting records, which will allow for the accurate identification of trust money and property;
  •  the timely posting of transactions in the accounting records;
  •  maintaining accounting records, including source documents, for at least seven years; and
  •  annual reporting of trust account involvement to the Society.

Although you may delegate accounting tasks, you may not delegate responsibility.

Are there any special requirements for opening a trust account?

Yes. All trust accounts must:

  •  be designated as such;
  •  be kept at a financial institution, i.e., a chartered Canadian Schedule 1 bank, credit union or Caisse populaire legally entitled to carry on business in the province; and
  •  bear interest payable to the Law Foundation of Nova Scotia, in accordance with Section 30 of the Legal Profession Act (Regulation 10.2.4(c)).

Who can be a signatory on trust account?

A practicing lawyer who has received approval to operate a trust account or who has been a signatory on a trust account as of December 31, 2018.  Any employee of the practicing lawyer or law firm who has direct involvement in the operation of a trust account can be a signatory for internal control purposes to facilitate dual authorization. All withdrawals must be made by a practicing lawyer who has received approval to operate a trust account (10.3.5(b)). Access to the trust account for employees who are not practising lawyers must be limited to “viewing access only”. 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.

Can an articled clerk be a signatory?

An articled clerk should not act as a signatory. Articled clerks are in a unique position as they are not yet lawyers but as members of the Society can be held responsible, unlike staff, for issues arising with a trust account to which they are a signatory. This is not a level of responsibility articled clerks should be expected to bear during their articling terms. Additionally during the term, articled clerks are only just being introduced to the concepts surrounding legal account and the trust account regulations. They do not yet have the knowledge or experience to be responsible for a trust account.

What are the consequences if an employee misappropriates trust funds?

All shortages must be restored immediately by the practicing lawyer or law firm (Regulation 10.6.1). The misappropriation must be immediately reported to the Executive Director (Regulation 10.6.3). 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 should ensure they have sufficient fidelity liability insurance coverage, and ensure appropriate internal controls are in place, including appropriate authorization processes, keeping trust cheques in a secure location, and restricting online banking access to “view only” for applicable employees.

Who can operate a trust account?

A practising lawyer who has received approval to operate a trust account pursuant to subregulation 4.10.4 (subregulation 10.3.5(b)). Notwithstanding subregulation 10.3.5(b), all practicing lawyers who have signing authority on a trust account as of December 31, 2018 may continue as signatories even if they have not received approval pursuant to subregulation 4.10.4.

Receipts/deposits

Does all money I receive need to be deposited into a trust account?

No. Only the following money may be deposited into a trust account:

  •  trust money;
  •  money that has been inadvertently drawn from the trust account in contravention of this Regulation; and
  •  money belonging in part to the client and in part to the lawyer or law firm if it is not practicable to divide the payment (Regulation 10.2.6).

When should money received in trust be deposited?

You must deposit money received in trust for a client into a trust account without delay, but not later than the first day after receipt (Regulation 10.2.3).

Is confirmation of the deposit required?

Yes. You must receive written confirmation from the bank for every third party deposit into a trust account without delay (Regulation 10.2.5). This confirmation must be retained in your records. Money is not considered to be received until its receipt is confirmed (Regulation 10.2.2).

What does “without delay” mean?

“Without delay” means no later than the close of the banking day immediately following the day you receive notification of receipt of funds into the trust account.

I use online banking. How can I meet the requirements of Regulation 10.2.5?

If you use internet banking, a printout of the online banking screen – showing the receipt of funds and the date the screen was viewed – can be used as written confirmation for the purposes of Regulation 10.2.5.

Does an escrow have to be deposited into a trust account?

Yes, unless the escrow agreement clearly indicates in writing that the money is to be held without deposit (Regulation 10.2.8). When funds are held in escrow without deposit, they must be recorded in your record of ‘other valuable property’.

Can I deposit my own money into a trust account?

No. You must not deposit your own money into a trust account unless you are acting as a client in a specific transaction (Regulation 10.2.7). This means you cannot maintain a ‘float’ or surplus funds in trust in order to cover possible bank service charges, which should not be deducted from your trust account in any event.

Can payment for legal services already provided be deposited into a trust account?

Only trust money may be deposited into a trust account (Regulation 10.2.6). “Trust money” means money held on behalf of a client or money advanced for fees for services not yet rendered (Regulation 1.1.1(cc)). Payment for legal services already provided to your client is not trust money and may not be deposited into a trust account. However, you may deposit money into a trust account representing, in part, money belonging to a client, and in part, money belonging to you or your law firm if it is not practicable to divide the payment (Regulation 10.2.6(c)). This could occur if your client makes a payment in part for fees already billed and in part for a retainer. The non-trust money (that is, the money belonging to you or your law firm) must be removed immediately.

How should my client pay for legal services already provided?

You should deposit payment from your client for legal services already provided into a general account, and never into a trust account. Once your client pays you for fees you have earned, the money is no longer considered to be trust money.

My bank charges me for receiving money into more than one bank account. May I receive fee payments and trust funds into my trust account and then transfer the fee payments to my general account?

No. Payment of fees for services already provided to your client is not trust money, and may not be deposited into a trust account. However, it is possible to receive fee payments and trust money into your general account and then transfer the trust money to your trust account. This transfer must be made within one day of receipt of the trust money (Regulation 10.2.3).

Can I leave the HST in my trust account after billing the client?

No. HST is not considered trust money.  The HST you collect on your accounts is a liability of your firm, not the client, and as such it should be withdrawn from your trust account at the time it is billed to the client. You may transfer these funds to a separate interest bearing general account until they are payable if you are concerned about having sufficient funds available when the HST is due.

Withdrawals

When am I allowed to withdraw money from a trust account?

Money may only be withdrawn from a trust account under the following circumstances:

  •  for payment on behalf of a client or another person,
  •  to remove inadvertently deposited funds,
  •  for payment of the lawyer’s or law firm’s fees that have been disclosed to the client,
  •  when authorized in writing by a person designated by the Society, and
  •  when directed by a Court of competent jurisdiction (Regulation 10.3.4).

How must money be withdrawn from a trust account?

Recognizing that the banking industry is continuously changing, the Regulations have moved away from lists of forms of withdrawal. Instead, the Regulations require adherence to a set of principles regardless of the form of withdrawal. Any withdrawal from a trust account must meet the following requirements:

  •  The payment is made to a named payee.
  •  The trust account and date of withdrawal are recorded.
  •  The lawyer or law firm ensures there are enough funds in the trust account for the credit of the client before the withdrawal is made.
  •  The lawyer ensures the client’s interests are protected before the withdrawal is made. For example, the lawyer should confirm the identity of the payee and investigate any suspicious activity (Regulation 10.3.5).

Who may withdraw funds from a trust account?

Only a practicing lawyer who has received approval to operate a trust account pursuant to subregulation 4.10.4 may withdraw funds from a trust account (Regulation 10.3.5(b))

Can my assistant make withdrawals from a trust account?

Only a practising lawyer is allowed to withdraw funds from a trust account. However, your assistant may be the second signatory on trust cheques or the second person if a dual access code is used for electronic transfers. Dual authorization is an appropriate internal control that is highly encouraged.

Can I share my electronic fund transfer passwords or access codes with my assistant?

Assistants may be given access to passwords that allow them to monitor trust account activity, but they must not have access to passwords needed to transfer funds from a trust account. An assistant is not allowed to make a withdrawal from a trust account without a lawyer (Regulation 10.3.5).

May I withdraw trust funds by cash or debit card?

No. Withdrawal by cash or debit card is expressly forbidden (Regulation 10.3.6)

How may I withdraw funds for the payment of legal services I have provided to my client?

You must meet the following requirements in order to withdraw money from a trust account for the payment of legal services provided to your client:

  •  The fees for the legal services provided must have been disclosed to the client. This is normally done by sending a statement of account to the client.
  •  You must record the trust account and date of withdrawal.
  •  You must make the payment by cheque or another format that is not cash or debit card.
  •  You must make the payment without delay, as your personal funds are not allowed to be stored in a trust account (Regulations 10.3.3, 10.3.4, 10.3.5, and 10.3.7).

Can I give verbal instructions for a wire transfer?

No. Wire transfers and other transfers made pursuant to the bank, excluding electronic funds transfers, should be made in writing and signed by a practicing lawyer who has received approval to operate a trust account pursuant to subregulation 4.10.4. The signed direction to the bank should be kept with your records (Regulation 10.3.7).

I use online banking. How can I comply with the Regulations?

You must access the electronic funds transfer system in accordance with Regulation 10.3.5 and ensure the passwords are controlled. You must also keep the signed electronic confirmation sent by the financial institution in your records (Regulation 10.3.7). This can be done by printing a copy of the internet banking screen showing the transfer report.

Electronic Banking

Can I operate a trust account using electronic banking?

Yes. Trust accounts can be operated through electronic banking.

Are client trust accounts at increased risk for theft?

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.

What should I be thinking about to control risk of theft?

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.

How do I create “documents” required by the Regulations?

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 screen shot on your Mac or Windows device.  If you use mobile banking on your phone, take the screen shot 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.

What if I am unable to comply with Regulatory Requirements?

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. 

How do I make Electronic Withdrawals?

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.

Can I transfer funds from my General Trust Account to the Service Nova Scotia Trust Account?

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. 

Can I transfer funds from my General (Operating) Account to the Service Nova Scotia Trust Account?

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.

How can I confirm non-member staff do not have the ability to 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.

How do I comply with the requirement to “deposit without delay”?

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.

What do I need to consider to operate my trust account through electronic banking?

Trust accounts can be operated through electronic banking.  Where changes to processes are being made, particularly in a crisis situation, there may be additional risks created. This may be a time to consider other additional controls and greater staff supervision and oversight 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.   Also, a pdf copy of the client’s trust ledger card (history of client transactions) should 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.
  • Lawyers 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 screen shot on your Mac or Windows device.  If you use mobile banking on your phone, take the screen shot 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.

Compliance with Regulatory Requirements

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

Below we provide some information based on the type of transaction:

Electronic withdrawals:

It is acceptable for a lawyer to use the Electronic Transfer Authorization Form to authorize the withdrawal/transfer of trust funds. A lawyer would not be able to 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.

Transferring funds from the General Trust Account to the Service Nova Scotia Trust Account:

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 funds from the General (Operating) Account to the Service Nova Scotia Trust Account:  

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, this can be done electronically; however, lawyers need to ensure that when setting up the online banking, non-member staff do not have the ability to solely process trust account transactions.

How can I confirm non-member staff do not have the ability to 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 should restrict online banking access to “view only” for applicable employees. Confirm employee staff access by obtaining documentation from your bank. 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 the transaction processing screen – their access may not be restricted properly. Confirm with your bank that any attempts to process a transaction will be denied.

Deposit without delay:

Electronic banking allows for deposit without delay; however, controls and precautions need to be considered.  Lawyers need to be aware of clearing periods on funds that have been deposited electronically to ensure they do not act on funds before they have cleared. Every law firm should discuss clearance periods with their banks.

Recording

What records do I have to keep?

You must keep the following records:

1) a book of original entry or data source showing all money received in trust, including:

  •  the date of each receipt of trust money
  •  the source of each receipt
  •  the identity of the client on whose behalf trust money is received
  •  confirmation from the bank of any third party deposit;

2) a book of original entry or data source showing all withdrawals of trust money, including:

  •  the date of each withdrawal from a trust account
  •  the name of each recipient
  •  the identity of the client on whose behalf the withdrawal is made;

3) a clients’ trust ledger for each client showing:

  •  all money received in trust for the client
  •  all money withdrawn on behalf of the client
  •  the balance of the client’s account;

4) a record of all property held in trust, including the identity of the client on whose behalf the property is held;

5) a book of original entry or data source for all money received other than trust money, including:

  •  the date of each receipt
  •  the source of each receipt;

6) a book of original entry or data source for all withdrawals of money other than trust money, including:

  •  the date of each withdrawal
  •  the name of each recipient;

7) a book, data source or chronological file of copies of billings showing:

  •  all fees charged to clients
  •  other billings to clients
  •  the date of each charge
  •  the identity of each client being charged;

8) for each trust account and general account:

  •  all bank statements
  •  any cashed cheques, or scanned image of the front and back of the cheque
  •  detailed deposit slips;

9) a record of all transfers of trust money between clients’ ledger accounts including an explanation of the purpose of each transfer; and

10) monthly reconciliations showing:

  •  the total balances held in all trust accounts
  •  the total of all unexpended balances as they appear in the books and records
  •  a detailed listing showing the amount of trust money held for each client, including the client’s identity
  •  a detailed reconciliation from the financial institution for each trust account
  •  the reasons for any differences between the monthly totals (Regulation 10.4.2).

Can I record receipts and withdrawals in the same book or data source?

Yes. You may record receipts to and withdrawals from a trust account in the same book. You must record the date of each receipt or withdrawal, the client(s) involved in each transaction, and the source of each receipt or the name of each recipient (Regulations 10.4.2(a) and (b)).

Do I need to keep a running total of my trust account balances?

Yes. Monthly totals of each trust account and each client trust ledger are required. This includes the total of all receipts and withdrawals for each trust account (Regulation 10.4.2(i)).

Do I have to keep cashed cheques?

You must keep either the cheque itself or the scanned images of the fronts and backs of the cheques (Regulation 10.4.2(h)). This includes certified cheques, which banks often do not return unless specifically instructed to do so. You should instruct your bank to send you all cashed cheques or the images of the fronts and backs of each cashed cheque with your monthly bank statements.

What is the purpose of reconciliation?

Monthly reconciliations ensure your records match the bank’s records of the amount of money held in trust. By comparing the amounts monthly, differences in the records are spotted on a regular basis. These differences can then be addressed and corrected without delay, preventing future errors.

When do I need to reconcile my accounts?

You must make monthly comparisons of each trust account’s bank balance, book of original entry and client ledger on a timely basis. Generally, this means within 30 days of the effective date of reconciliation. It is good practice to review, sign and date each monthly reconciliation, particularly if you have delegated this activity to a staff member.

How long do I need to keep trust account records?

You must keep all accounting records, including source documents, for at least seven years (Regulation 10.4.1(c)).

What if a trust account has been inactive for one month or more?

Monthly reconciliations of all trust accounts, including inactive accounts, are required under the Regulations. This means that even if the account has remained inactive since the previous month, you are still required to compare and record the account’s monthly bank statement with your records.

How do I clear stale-dated cheques?

A cheque is considered to be stale-dated if it remains uncashed six months after being issued. During your regular monthly reconciliations, you should identify uncashed cheques that are nearing the stale date and contact the payee to have the cheques cashed. If a cheque becomes stale-dated, a stop payment should be put on the cheque and a new cheque should be issued.

What client identification information is required?

You must record and keep the following information for each client:

  •  your client’s full name
  •  your client’s business address and telephone number
  •  if your client is an individual:
    •  your client’s home address and telephone number
    •  your client’s occupation(s)
  •  if your client is an organization:
    •  the name, position and contact information for the individual(s) authorized to give you instructions
    •  the general nature of the type of business or activities engaged in by the client, unless the organization is a financial institution, public body or reporting issuer
    •  the incorporation or business identification number including its place of issue, unless the organization is a financial institution, public body or reporting issuer (Regulation 4.13).

For more information, please see the Society’s Client Identification & Verification Overview Chart.

Overdrafts

Am I ever allowed to have an overdraft?

No. You must maintain sufficient balances on deposit in trust to meet your obligations with respect to money held in trust for clients (Regulation 10.6.1). Before withdrawing money from a trust account, you must ensure that you have enough funds in the account to complete the withdrawal (Regulation 10.3.5(d)). This means that you may have to wait for a recent deposit to clear the bank before performing a withdrawal.

What should I do if a withdrawal results in trust obligations exceeding funds on deposit?

If you make a withdrawal that results in the balance of the trust account being insufficient to meet all trust obligations, you must add enough money to address the deficiency immediately (Regulation 10.6.1).

Unless the overdraft is less than $50, a practising lawyer or law firm must, in the prescribed form, immediately report to the Executive Director any overdrafts in the practising lawyer’s or law firm’s trust account, including any relevant information regarding the reason for the overdraft if

  1. the overdraft was not corrected within 7 days of the time the shortage arose; or
  2. the overdraft is an amount greater than $2,500, regardless of when it occurred. (Regulation 10.6.3)

All overdrafts, regardless of dollar value or prior report pursuant to subregulation 10.6.3, must be reported on the practicing lawyer or law firm’s annual trust account report (Regulation 10.6.4)

You must not withdraw any more money from the account until sufficient funds are added.

What should I do if an overdraft is caused by a banking error?

Even if the overdraft is caused by a banking error, you must correct the error without delay.

To prevent your bank from withdrawing service charges from a trust account, you should instruct the bank to withdraw service charges from your general account instead.

May I keep personal money in a trust account to prevent an overdraft?

No. You must not keep your personal money in a trust account (Regulation 10.2.7).

Inactive accounts

I have one or more trust accounts that have been inactive for 30 days. What should I do?

Trust money that is not required for more than 30 days may be deposited in a separate trust account that credits interest to the client, rather than to the Law Foundation of Nova Scotia. You must advise your client of this option when you have reasonable grounds to believe their money will not be required for more than 30 days (Section 30(5) of the Legal Profession Act)Sometimes, you don’t expect funds to be held for over 30 days but circumstances change. In such cases, you should consult with your client about his or her wishes. Although it is not required under the Regulations, it is best practice to obtain written confirmation from the client detailing the information discussed and the decision chosen. Monthly reconciliations of all trust accounts and client ledgers are required, even for trust accounts that have remained inactive.

What should I do with undistributed or unclaimed trust funds?

Undistributed or unclaimed trust funds should be recorded where possible. After making any required disbursements, the remaining funds must be returned to the client as soon as possible. If your client cannot be located, you must keep the funds for two years and then apply to the Nova Scotia Barristers’ Society to disburse the funds to the Public Trustee. Find the Application for Disposal of Undistributed Trust Fund.

Monthly reconciliations of all trust accounts and client ledgers are required, even for trust accounts that have remained inactive.

Audits and investigations

How are lawyers or law firms selected for audit?

The Executive Director has the authority to initiate an audit of any practising or former lawyer or law firm (Regulation 10.7.1). A continuing program of unannounced audits may also be directed (Regulation 10.7.2). In addition, the Executive Director may randomly select lawyers or law firms for audit (Regulation 10.7.3).

If I am audited, what records will the investigator require?

You must provide the investigator with all evidence, books, records, papers, accounts, vouchers, files, clients’ files and explanations that may be required (Regulation 10.7.4). Failure to cooperate with the investigator constitutes professional misconduct.

Will I receive a copy of the audit report?

Yes. The Executive Director must provide you with a copy of the audit report (Regulation 10.7.5).

What are the consequences of non-compliance with the Regulations?

If the auditor reports that the Regulations have been violated, the Executive Director may:

  •  order the offending lawyer or law firm to take all necessary steps to comply with the Regulations, or
  •  initiate whatever action is appropriate under Part III of the Legal Profession Act (Regulation 10.7.7).