This chapter describes the receipt of trust funds into a pooled trust account. Regardless of whether your client wants their funds in a separate interest bearing trust account (SIBA), you must always deposit the funds initially into your pooled trust account. You may then transfer funds to a SIBA.
Pooled Trust Accounts
A pooled trust account must:
- be established at an approved depository (i.e., a bank, credit union or ATB branch in Alberta) (Rules 119(1)(c) and 119(1)(q));
- be kept in your law firm's name (Rule 119.16(2));
- be designated as a "trust account" containing funds for more than one client, and the word "trust" must appear on both your bank statements (Rule 119.36(3)(b)(iii)) and cheques (Rule 119.16(2));
- be readily available for you to draw on (Rule 119.24(1));
- provide you with cancelled cheques or cheque images and bank statements (Rule 119.36(4)(h)) (Some approved depositories now store cancelled cheques at a data centre and this, on its own, is not sufficient. You must instruct the institution to return cancelled cheques, or acceptable electronic versions of the front and back of the cheques, to you. You can “print” these images to PDF and store them but cannot rely on the bank's website to store these records for you);
- hold a maximum of $500 as a float of your own money, except as required to make up a shortfall under Rule 119.19(4)(d);
- pay interest earned to the Alberta Law Foundation; and
- be reconciled monthly no later than the end of the following month (a monthly reconciliation is based on the calendar month (i.e., January 1-31 is due by February 28.)
Pooled trust accounts must be held at the financial institutions that are an "approved depository" (Rule 119(1)(b)). Approved depositaries are branches in Alberta of:
- a chartered bank or trust company which is insured by the Canadian Deposit Insurance Corporation (CDIC)
- a credit union that is a member of the Credit Union Deposit Insurance Guarantee Corporation or
- a treasury branch established under the Alberta Treasury Branches Act (Rule 119(1)(b))
There are special rules for law firms practicing from offices in Lloydminster which allow trust accounts to be maintained at branches of Canadian chartered banks located in the portion of Lloydminster within Saskatchewan, or a credit union in the portion of Lloydminster that is within Saskatchewan that is a member of the Credit Union Deposit Guarantee Corporation (Rule 119(1)(c)).
For every pooled account you hold with an approved financial institution, other than a credit union or an Alberta Treasury Branch, you must file an annual CDIC report with that institution by May 30 of each year for the balances held as of April 30 (Rule 119.32 and the Canada Deposit Insurance Act, Schedule 1: Deposit of Beneficiary). This ensures that each of your client’s funds (and not just the pooled account itself) is insured up to the $100,000 limit of CDIC insurance. When filing your report, do not use client names because this breaches client confidentiality. It is best to use file numbers or some other confidential alphanumeric identifier.
Pooled trust accounts must be:
Separate: The pooled trust account must not be commingled with any personal or general funds of the firm or of any lawyer. The firm may have a nominal amount in trust to cover bank service charges. Personal legal transactions may be transacted through the law firm trust account provided that the funds are paid out forthwith.
Identifiable: The pooled trust account bank statements, cheques and deposit slips must be clearly labelled as “trust.”
Accountable: Books and records for the pooled trust account must be accurate, up-to-date, and readily accessible on-site for the current year and previous two years. Records must be maintained for at least 10 years after matters are completed.
You must give a written letter of instruction to the approved depository to forward all the interest earned on the pooled trust account to the Alberta Law Foundation, as required by section 126(1) of the Act and Rule 119.16(3).
Only a lawyer who is practising with a law firm approved to operate a trust account is permitted to receive trust money (Rule 119.2), except for in-house counsel only handling trust money for the benefit of their employer (Rule 119.1.1).
You must deposit all trust funds that you receive into a pooled trust account before the next banking day (Rule 119.19(1)). However, after depositing trust money into a pooled trust account you can transfer funds on client instruction into a SIBA in accordance with section 126(3) of the Legal Profession Act and Rule 119.20(1).
Deposit of Credit/Debit Card Receipts
Rule 119.44(1)(a) requires that “trust receipts must be deposited, within two banking days, directly into a trust account.” Previously, law firms have had two options to comply with this Rule when receiving trust and general receipts by credit/debit cards:
- Have one payment terminal that is connected to the trust account. If general funds are received into trust, transfer them expeditiously to the general account.
- Have two payment terminals; one connected to the trust account for trust receipts, and one connected to the general account for general receipts.
A new option is now available which involves one credit/debit card terminal that allows two separate merchant numbers – one for trust and one for general. This option provides an appropriate alternative for law firms that are receiving both trust and general funds from clients via credit/debit cards.
- This can only be done through a point of sale terminal provider.
- Firms must have their general and trust account at the same bank so they can be sure to set up any associated fees to be taken out of the general account only.
- Regardless of the terminal option a law firm chooses, it must ensure it is receiving trust and general receipts by credit or debit cards in compliance with Rule 119.44.
Credit Card Fees
If you receive trust funds by way of a credit card, the law firm is responsible to cover the transaction or service fee that is deducted for the credit card payment. For example, if funds are deposited by credit card into the general account to pay a fee, the firm must apply the full amount of the client’s payment to the client’s fee account and may not charge a processing fee to make up for the credit card merchant fee. If the client pays with a credit card and the amount is paid into the general account, but is destined for the trust account, the firm must immediately transfer the full amount of the client’s payment from its general account to the trust account, without deducting the merchant fee (Rule 119.19(3)). Alternatively, if credit card funds are received directly into the trust account, the firm must expeditiously cover the merchant fees or other service fees from the general account (Rule 119.44(1)(f).
It is a good idea to leave a small amount of your money in your trust account as a float to cover bank service charges, to a maximum of $500 (Rule 119.19(4)(d)).
<3.5 Accountabilities and Audits
3.7 Types of Trust Accounts - Separate Interest-Bearing Trust Accounts (SIBA)>