Yes, the task of maintaining and reconciling the law firm’s trust accounts can be delegated to an accounting firm or separate accounting department, but the responsible lawyer must ensure they are properly reconciled and prepared by the end of the month.

Any errors, discrepancies, shortfalls or other exceptions will lie with the responsible lawyer.

Using an accounting firm may lead to conflicts of interest that prevent the law firm from retaining the accounting firm to prepare the Accountant’s Report. It may also affect timeliness of posting the transactions and preparing the reconciliations.

On a monthly basis, a law firm must print or digitally capture the financial records for all:

• Trust accounts, except for client trust ledgers provided they can be retrieved upon demand; and,
• General accounts, except for the accounts receivable ledgers, provided they can be retrieved upon demand.

View the Prescribed Records resource for more information.

A law firm must maintain all prescribed financial records in a safe and secure location, retrievable on demand, for a minimum of ten full years.

As a Responsible Lawyer, you are responsible for all trust money and property received from a client.

Trust bank reconciliations are a key internal control over a law firm’s assets. A reconciliation is proof that there are sufficient funds in trust; it compares what should be in trust based on your books versus what is in the bank account.

Performing monthly reconciliations allows firms to:

• locate mistakes in their books or bank statements early;
• track problematic transactions (e.g., long outstanding transactions, automated pre-authorized debits, bank fees incorrectly incurred on the law firm’s trust accounts and any other bank errors); and
• identify fraud or accounting errors.

Review the Trust Bank Reconciliation resource for more information on what to include in a trust bank reconciliation package and how to review one.

A credit balance may indicate the following:

• Trust payment made to the general account without rendering a statement of account first.
• An overpayment by a client of an account. Any payment should be returned to the client or deposited to trust immediately.
• The statement of account has not been posted.

Yes. Rule 119.27(1), states that “all withdrawals and transfers of trust money must be approved by a lawyer of the law firm, with any such approval recorded in paper or digital form and maintained with the monthly reconciliation of the law firm’s trust accounts.”

• An email confirmation, other electronic authorization or transfer document signed by the lawyer can be accepted to approve the trust transaction (withdrawal or transfer).
• The use of an electronic signature to approve or sign the transfer document is permitted by the lawyer. Lawyers should implement strong access and security controls over the use of their electronic signature, such as using a strong password and two-factor authentication.

Electronic payments can be made from the trust bank account in accordance with Rules 119.31.

View the following forms for more information:

• Electronic Banking Withdrawal
• Bank Drafts and Money Orders

A law firm may deposit money into its accounts using an ATM subject to the following conditions:

• an ATM card for a trust account must be restricted to deposit only;
• trust money must be deposited directly into a pooled trust account of the law firm by the next banking day; and
• the payor, client name and file number, if applicable, must be recorded on all ATM receipts.

The deposit must be recorded in the applicable account journal and the ATM receipt must be attached to the deposit slip.

Rule 119.27(1), states that “all withdrawals and transfers from a trust account must be approved by a lawyer of the law firm with such approval recorded in paper or digital form …”. In practical terms this requirement becomes particularly relevant to individuals in a sole practitioner or small firm setting. Typically, larger firms have segregation of duties where a lawyer authorizes a transaction via paper or electronic methods, with a separate accounting department/individuals delegated to sign cheques.

• An email confirmation, other electronic authorization or transfer document signed in compliance with Rule 119.28 by the lawyer can be accepted to approve the trust transaction (withdrawal or transfer).
• If a firm does not have electronic cheque printing capabilities or is unable to place an electronic signature when printing a cheque, then they will have to resort to the conventional paper cheque that requires a “wet signature” for it to be honoured at the bank.
• The cheque has to be signed by a lawyer within the law firm.
• If a trust cheque requires signature during a time where there is no active lawyer of a law firm available, an alternate signatory must be approved by the Law Society.

Requests to have an alternate signatory approved should be submitted to Trust Safety prior to the absence and must include the following information:

• The time period needed
• The full name of the proposed alternate signatory
• The reason for the request

Please note the Rules of the Law Society of Alberta no longer allow for a non-lawyer to have signing authority on a law firm trust account. Only active lawyers employed by the firm or an active lawyer not employed by the firm (with Law Society approval) may have unilateral signing authority on trust accounts. Please refer to Rule 119.27(3) of Part 5.

Cheques must bear the signature of a lawyer authorized to sign the cheque, and a non-lawyer may only provide a second signature on the cheque. Please refer to Rule 119.30(1).

Retainer letters should meet the requirements outlined in Chapter 2, Rule 2.06 of the Code of Conduct.

No. Normally these charges are considered fees or other charges and should be included under fees, not disbursements on the statement of account. A heading such as “Other Charges” can be used to describe these amounts.

Retainers can be deposited directly into the law firm’s general bank account provided certain conditions are met.

General retainers are very rare, but are permitted where the client has signed a written acknowledgement that:

• The money is not refundable and belongs to the law firm immediately upon receipt;
• The law firm is not obliged either to account for the money or render services with respect to the money; and
• Services may never be rendered with respect to that money.

In other words, all subsequent work would be considered free. The services performed to date may justify the amount on the statement of account.
The entire funds cannot be transferred from trust until the agreed services have been performed. A partial transfer of the amount held in trust is permissible when the amount equals the proportion of work completed, and only then as a result of a written prearrangement with the client.

In other words, the lawyer renders a statement of account that lists all the services performed and, in addition, lists services to be performed in the future.

The entire funds held in trust cannot be transferred from trust until all the agreed services have been performed. A partial transfer of the amount held in trust is permissible when the amount equals the proportion of work completed, and only then as a result of a written prearrangement with the client.

Refer to Rule 10.7 of the Rules of Court, which provides the requirements for a contingency fee agreement. Please contact the Practice Advisors if you have any further questions.