3.3
Accounting Terminology and Basics

The basic statutory framework relating to trust accounting is found in:

Definitions and Introductory Issues

"client" includes a person or group of persons from whom and on whose behalf, money is used by the law firm, if the money was received by the law firm in the course of its law practice and in relation to the provision by the law firm of legal services (Rule 119(1)(e));

"general account" is an account you maintain, other than a trust account, in relation to your practice (Rule 119(1)(k));

"money" means a negotiable instrument and includes cash, cheques, drafts, credit card transactions, money orders, and electronic transfer of deposits initiated by the client or at financial institutions (Rule 119(1)(p));

"funds" (as defined in the client identification and verification rules) means cash, currency, securities and negotiable instruments or other financial instruments that indicate the person’s title or right to or interest in them;

"trust money" means funds received in trust by you acting in the capacity of a barrister and solicitor in connection with your practice in Alberta and the provision of legal services and that belongs in whole or in part to the client, as well as money received as a general retainer (Rule 119(1)(v)). Note that there are exclusions from this definition. For example, money received to pay a fee account where services have already been rendered are not trust funds.

In some instances, third parties may pay your fees or provide money that you hold in trust on behalf of your client. You may face a dilemma as to who is entitled to the money. You can contact the Practice Advisors for assistance but, in extreme cases, you may need to apply to court to settle the question.

It is important to think about the issues that might arise before you agree to accept money from anyone other than your client, and what should happen to any funds paid by a third party. If possible, have your client and the third-party payor agree who will be entitled to the funds, and in what circumstances.   You should advise third party payors that they are not your clients and that you are not protecting their interests. 

Best practice is to have an agreement on file stipulating what should happen to any remaining balance of money paid by a third party, or if the client or third party demands the money before the end of the retainer. The agreement should be in place before the firm accepts the payment.

If you are receiving money that you must pay out soon after receipt, ask that they be electronically deposited into your trust account as this method of payment is guaranteed and immediately available. Please see Frequently Asked Questions in Trust Safety Detailed Accounting Questions.


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Last modified: Tuesday, 15 June 2021, 5:23 PM