Avoiding Pitfalls

The following are some suggestions to avoid common trust accounting pitfalls:

    • Confirm in the retainer letter that may take funds from trust to satisfy your statement of account.
    • Review the individual client trust ledger and trust bank account to ensure there are sufficient funds held for that client before issuing a trust withdrawal or transfer. You risk a shortfall if you only rely on the client’s file. 
    • Operating too many trust accounts often causes confusion and errors. 
    • Deposit trust money into a pooled trust account of the law firm by the next banking day. Do not keep cheques in the client file.  A shortfall will result if the cheques have not actually been deposited.
    • Pay out of a SIBA and not a pooled trust account when you hold a SIBA for a client. If you pay out of the pooled trust account, this results in the client improperly benefiting from the use of other clients' funds (i.e. the pooled account will be overdrawn and the client will continue to get SIBA interest). 
    • Request that funds are in the form of a transfer directly into your trust account instead of a cheque, if you must pay out before a cheque has time to clear the bank. Alternatively, get the money in early enough so that it has time to clear.
    • Allow enough time for the clearance of a trust cheque or have the trust cheque certified if you are concerned about deadlines. 
    • Be aware of processing times for cheques. Cheques presented for payment are generally processed on the same date, but deposits made after a certain time (usually 3 p.m.) may not be credited until the next day. In either case, be aware of potential delays on closing of transaction due to processing times. 
    • Be aware that cheques deposited at one bank to the credit of an account at another branch may not be credited for several days if they use a courier system.
    • Provide clear instructions to your staff about your trust account and require all concerns to be brought to the attention of the Responsible Lawyer immediately.
    • Keep physical trust ledgers on-site at your office. Although many bookkeepers work off-site, this is not an option if you have a manual accounting system. If you need to disburse funds from trust and the client trust ledger is not in the office, you cannot proceed.
    • Confirm your client’s mailing address or ask them to pick up the trust cheque to ensure safe delivery as stop payments may be ineffective. 
Last modified: Monday, 21 August 2023, 10:42 AM