3.6 Types of Trust Accounts - Pooled Trust Accounts
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 depositary (i.e., a bank, credit union or ATB branch in Alberta) (Rule 119(1)(d))
- be kept in your law firm's name (Rules of the Law Society of Alberta, Rule 119.16(2))
- be designated as a "trust" containing funds of more than one client, and the word "trust" must appear on both your bank statements (Rule 119.36(3)(b)) 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 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))
Pooled trust accounts must be:
Separate: The pooled trust account must not be commingled with any personal or general funds of the practice. No personal or business funds of the lawyer, other than a nominal amount to cover bank service charges, may be held in the pooled trust account. Personal legal transactions may be transacted throughout the law firm trust bank account provided 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 and previous two years. Records must be maintained for at least ten years after matters are completed.
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 125(3) of the Legal Profession Act and Rule 119.20(1).
If you receive trust funds by way of a credit card, the law firm must immediately transfer sufficient funds from its general account to the trust account with the discount fee being deducted for the credit card payment (Rule 119.19(3)).
You must give a written letter of instruction to the approved depositary 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).
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)(b)).
It is a good idea to leave a small amount of your money in your trust account because Rule 119.21 (3) lists the only acceptable withdrawals from trust accounts, and bank charges are not one of them.
For every pooled account you hold with an approved financial institution, other than a credit union or an Alberta Treasury Branch, you must file with that institution an annual CDIC report 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 is so each of your clients' 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 identifier.
If you have deposited funds in a pooled trust account in expectation of an early payout, you should consider seeking your client's written instructions to open a SIBA if the payout is delayed. There have been claims against lawyers for failing to recommend a SIBA in appropriate circumstances.
If you have failed to open a SIBA after having committed to the client to do so, please report the matter to ALIA.