The basic statutory framework relating to trust accounting is found in:
- Client is one or more persons from whom trust money or trust property is received or on whose behalf trust money or trust property is held by a lawyer or law firm (Rule 119(h)).
- General account is an account you maintain, other than a trust account, maintained by a law firm in connection with the law firm’s legal practice (Rule 119(p)).
- Pooled trust account is an account comprised of funds held for a variety of clients (Rule 119(u)). The interest earned on pooled trust accounts is remitted to the Alberta Law Foundation (Legal Profession Act, section 126(1)).
- Money means a negotiable instrument and includes cash, cheques, bank drafts, credit card transactions, money orders, and electronic payments and transfers (Rule 119(t)).
- Funds means cash, currency, securities and negotiable instruments or other financial instruments that indicate the person’s title or right to or interest in them (Rule 119.45(g)).
- Trust property means any property of value that belongs to a client or is received on a client’s behalf, other than trust money that can be negotiated or transferred by a lawyer or law firm.
- Trust money means money entrusted, received by, or held by a lawyer:
- for or on account of the lawyer’s client or other persons;
- in the lawyer’s capacity as a barrister and solicitor;
- in connection with the lawyer’s practice in Alberta and the provision by the lawyer of legal services;
- that belongs in whole or in part to a client, is received or held on a client’s behalf, or that is held on a client’s direction or order; and
- money received by a lawyer as a retainer (Rule 119(bb)).
Note that there are exclusions from this definition. For example, money received to pay a fee account where services have already been rendered is not trust money.
Things to Consider
Payments from Third Parties
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.
The 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.
Availability of Electronic Deposits
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 Trust Safety: FAQ.
Unattributed or Undisbursable Trust Money
If you have been holding client trust money and you have been unable to locate your client for more than two years, or you are unable to attribute the funds to any client or other person, you may apply to pay those funds to the Law Society as per Rule 119.43 (1) and section 117(1) of the Legal Profession Act. If permission is obtained, your liability to pay the money to the person on whose behalf it was held, or to that person’s legal representative, is extinguished when you pay the money to the Law Society. The Law Society is required to maintain the money as stipulated by the Act.
If the amount is less than $50, you can use the Short Form Undisbursable Trust Money form. If the amount is greater than $50, you must use the Long Form Undisbursable Trust Money form.
The Long Form Undisbursable Trust Money form requires you to specify the efforts you have made to locate the person and any unfulfilled undertakings in relation to the funds. It is important to note that, for the purposes of the application, a “person” is defined in section 28(nn) of the Interpretation Act, RSA 2000, c.I-8 to include a corporation as well as heirs, executors, administrators, or other legal representatives of a person.