1. Trust Money – The Client’s Money
When a member or law firm receives money in connection with their legal practice to be held for the benefit of the client, that money is trust money. All trust money must be paid into the law firm’s pooled trust account and recorded in the trust accounting records before being used or disbursed in any way.
Trust money does NOT belong to the law firm or member even though it sits in a law firm’s trust bank account.
Trust money belongs to the client and the client must be informed and give prior consent to any use of that trust money by the member or law firm.
Some examples of trust money include:
- the sums paid as a retainer to pay for future legal services;
- any money received in relation to a client’s purchase of property;
- the proceeds of a mortgage to purchase property;
- any money received in relation to a client’s sale of property;
- money paid or received to settle a legal dispute;
- money received but intended to be paid out on behalf of a client; and
- money received from an estate.
To complement the basic principle that trust money is the client’s money, there are a number of very specific rules:
- At all times there must be sufficient money in the trust bank account to meet the member’s obligations to all clients with respect to trust money [Rule 5-44(1)(i)].
- A member cannot:
- overdraw a trust bank account [Rule 5-44(1)(f)];
- pay any personal or business related expenses from the trust bank account [Rule 5-44(1)(h); or
- appropriate trust money or other property for fees without the express or implied authority of the client [Rule 5-55].
- Only trust money can be kept in a trust bank account [Rule 5-44(1)(k)].