(Handling of Trust Monies and Record Keeping)
a) Steps to Follow when Receiving Trust Money
For illustration purposes, assume you are using a manual accounting system. While the steps are similar for computerized accounting systems, how you set up a client or create the client trust ledger would be different for the two types of systems.
You are meeting with your first client, and at the end of the meeting, the client writes a cheque payable to your firm to retain you to act. What do you do?
TRUST MONEY RECEIVED:
You will need a duplicate receipt book, the book of original entry, a client trust ledger & deposit record.
STEP 1: Give the client a receipt for the money from your duplicate receipt book. Even though it is a cheque, it is good practice to get used to giving every client a written receipt from your duplicate receipt book any time you receive money from the client. Some lawyers regularly meet with clients at places other than the office. If this is you or a member of your firm, you should be carrying a small receipt book separate than the one at the main office. A duplicate receipt book protects you and protects the client.
REMEMBER: if the client gives you CASH as the retainer, you MUST give the client a written receipt from your duplicate receipt book, specific information needs to be recorded on the receipt AND both you and the client must sign the receipt.
STEP 2: Record in the book of original entry that you received the money, that the money was received by cheque, who gave the money to you, what client and matter the money is for, the date you received the money, that you gave a duplicate receipt and the file number if one exists.
STEP 3: Create a new client trust ledger for the new client and record the receipt of the money including all the same details you included in the book of original entry.
STEP 4: Deposit the money to your pooled trust account as soon as is practicable (within one or two business days) and get a deposit record from the bank/savings institution. For most firms, this is accomplished using a deposit book to list the details about what is included in the deposit and the bank teller stamps the deposit book when it is processed.
You need to file a statement of claim for the above client, and wish to use the client’s money in the pooled trust account for the filing fee disbursement. What are the steps to be able to make a payment out of the pooled trust account?
What do you do?
b) Steps to Follow when Paying Monies Out of Trust
STEP 1: Check that the pooled trust account has sufficient money held for the client. In order to find out if this client has enough money in the pooled trust account to pay for the disbursement, you must confirm the funds are available, as described in the prior section, as you cannot overdraw any client’s client trust ledger.
STEP 2: If you have completed Step 1 and the result is that there are confirmed available funds to cover the cheque, prepare the trust cheque. The trust cheque must be completed with the current date, the amount, the payee [here the Minister of Finance for the statement of claim filing] and the client file number BEFORE it can be signed. A trust cheque must be signed by at least one lawyer in the firm.
STEP 3: Record all the particulars in your book of original entry related to the fact that you wrote a trust cheque on the pooled trust account including the purpose (to pay for the expense of the filing fee for a statement of claim) the payee (payable to the Minister of Finance), the date, the file number for that client matter. Full information for the withdrawal of the trust money must be recorded.
STEP 4: Record all the particulars in your client trust ledger for that client matter related to the fact that you wrote a trust cheque on the pooled trust account including the purpose (to pay for the expense of the filing fee for a statement of claim) the payee (payable to the Minister of Finance), the date, the file number for that client matter. This is because full information for the withdrawal of the trust money must be recorded in the client trust ledger as well as the book of original entry.
c) Steps to Follow When Transferring Between Client Trust Ledgers
STEP 1: Obtain the client’s authorization to transfer the monies and document it.
STEP 2: Confirm that there are funds available as described in the prior section.
STEP 3: Record the transfer in the book of original entry. Full details about the transfer must be recorded, usually as a separate line for each matter affected by the transfer.
STEP 4: Record the transfer details in both affected client trust ledgers. Full details about the transfer must be recorded.
You can find example transactions for a newly opened law firm, together with a fully completed book of original entry and client ledgers here.