FAQs: Trust Accounting & Bookkeeping

It may be possible for a non-licensee to sign a trust cheque, but only in exceptional circumstances and subject to certain requirements. In addition, because of the significant risk of theft associated with having a non-licensee sign trust cheques, lawyers and paralegals should canvass all other available methods of payment from trust, such as electronic funds transfers, bank drafts, and wire transfers, before considering this option.

If the lawyer or paralegal has reviewed all other options, section 11(b) of By-Law 9 states that a cheque drawn on a trust account must not be signed by a person who is not a licensee except
 

• in exceptional circumstances, and
• when the person who has signing authority on the trust account is bonded in an amount at least equal to the maximum balance on deposit during the immediately preceding fiscal year of the lawyer or paralegal in all the trust accounts on which signing authority has been delegated to the person.

 
Although COVID-19 may qualify as an exceptional situation, having the non-licensee bonded might not be feasible if the insurance provider is unable to provide such services during COVID-19.

If a non-licensee signs a trust cheque(s) in accordance with section 11(b), the lawyer or paralegal should create a record of why the lawyer or paralegal was unable to sign the trust cheque(s) and required a non-licensee to sign, and maintain the record with the trust cheque(s) signed by the non-licensee.

Last updated: March 27

No, lawyers and paralegals must not use electronic signatures on trust cheques. Lawyers and paralegals should maintain control over the access and use of their trust and general cheques.

Last updated: March 27

Yes, but, at this time, these circumstances should still be rare. The existing requirement is important as it ensures that client funds are handled properly and that the lawyer or paralegal is responsible for those funds.

Alternative Deposit Options:
If lawyers and paralegals are anticipating concerns with depositing funds into trust at the branch of their financial institution by the end of the next business day, they should first consider whether there is an alternative deposit option:
 

1. Deposit by ABM

Lawyers and paralegals are permitted to deposit funds into trust by ABM. For more information, consult the Frequently Asked Practice Management Questions regarding COVID-19 about ABMs or the Law Society’s Bookkeeping Guide for Lawyers or Bookkeeping Guide for Paralegals.
 

2. Remote deposit capture

Lawyers and paralegals may use remote deposit capture – a technology, typically used via mobile device, which gives users the ability to deposit cheques remotely into an account at their financial institution. The user does not have to deposit or deliver the cheques directly to the financial institution. This should ensure that trust funds are deposited promptly. 

For more information about what remote deposit capture is, including its benefits and risks, and how to integrate it into practice, lawyers and paralegals should review the Law Society’s Remote Deposite Capture resource.
 

3. Transfer from general to trust

If a lawyer or paralegal receives cash or a cheque for deposit into trust and is unable to attend at their financial institution to deposit it, an electronic transfer from general to trust could be made with a notation in the lawyer or paralegal’s bookkeeping records explaining that due to COVID-19 the transfer was made to ensure trust funds were properly deposited in a timely fashion. Although not required by By-law 9, at a later date, the lawyer or paralegal may deposit the cash or cheque into their general account as it belongs to them.
 
Securing Funds, Best Efforts, and Documentation:
If a lawyer or paralegal is unable to deposit a cheque or cash into trust at their financial institution or by one of the alternative deposit options described above by the end of the next business day, the lawyer or paralegal should:

• Secure the trust cheque or cash
• Create a record of
  • How the funds will be secured for the interim period until deposit
  • Why the lawyer or paralegal was unable to deposit the funds into trust (e.g., branch was closed and ABM out of service)
  • The plan for depositing the funds into trust as soon as possible thereafter
  • When the deposit was ultimately made

Lawyers and paralegals should ensure that no trust funds are disbursed from a client’s balance until the lawyer or paralegal has ensured that that the money is in trust for the client through one of the above options. 

As noted above, although in some cases lawyers or paralegals may be unable to meet the requirement, these instances should be rare. Lawyers and paralegals are expected to make and demonstrate best efforts in meeting these obligations and are reminded that they are responsible for the client’s funds once accepted.

The Law Society’s Rules and by-laws do not prescribe a single method of funds transfer between licensees. However, in keeping with the Law Society’s commitment to physical distancing and remote or virtual practice wherever feasible, the Law Society recommends that where funds are being transferred between licensees, electronic transfer methods, such as electronic trust transfers, email transfers, or wire transfers, should be used wherever possible.

In addition to the general information about bookkeeping requirements in the context of COVID-19 set out on the Law Society’s website, including information about Form 9A electronic transfer and email transfers, see By-Law 9, s. 12; Form 9A; and the Law Society’s frequently asked questions on Trust Deposits, Transfers, and Withdrawals

Last updated: April 2

Last updated: December 17

It depends on several factors, including the payment terms and conditions agreed upon by the parties, and what steps a licensee has taken with its financial institution, its client, and the licensee on the other side prior to sending or receiving the wire transfer payment. 

Generally, however, absent an agreement to the contrary, each licensee is responsible for the wire transfer fees deducted by their own financial institution from their accounts or from payments made to them. Such fees are incurred by the licensee pursuant to the account services agreement between the licensee and their own financial institution. 

Licensees may consider using the guidance below to assist them in determining who will be responsible for the wire transfer fee in a matter, whether the fee may be charged to their client as a disbursement, and how to comply with their professional obligations in respect of these fees.

• Assess if there is a required method of payment

  The method of payment may be dictated by the terms of an agreement. Licensees should review the agreement or other relevant documents to determine if the method of payment is stated. If the terms are silent on method of payment, licensees may determine what method of payment meets their client’s needs and should discuss this and the payment of any associated wire transfer fees with their client and the licensee on the other side.

  Particularly during COVID-19 where there may be health and safety concerns and/or restrictions on services offered by financial institutions, where there is flexibility, licensees should consider using methods of payment that allow for timely payment processing and completion of transactions.

• Advise client of wire transfer issues, if any

  Licensees should ensure that their clients are aware of issues related to wire transfers at the earliest opportunity and consider confirming this information in writing. Depending on the circumstances, this may include:

  • Whether and, if so, how payment of the wire transfer fees was addressed in the agreement
  • If not, the reasons the licensee believes that a wire transfer is appropriate in the matter
  • Any risks associated with wire transfers
  • The amount of the wire transfer fees, if known
  • The way wire transfer fees may be deducted from the amount of the transfer sent or received, and
  • The need to confirm method of payment and responsibility for the wire transfer fees with the licensee on the other side.

   
  If applicable, it would also include disclosing to the client that the wire transfer fee would be charged to them as a disbursement.
• Consider whether wire transfer fees may be charged to your client as a disbursement
  A licensee may be able to charge a transaction-specific wire transfer fee to a client as a disbursement provided that 

  • it is not in the context of a lawyer advertising an all-inclusive price to act on a residential real estate transaction 
  • the fee charged is no more than the actual cost of the wire transfer fee
  • the fee is fair and reasonable, and 
  • the licensee disclosed the fee to the client in a timely way. 

  
  Cannot be charged to client if lawyer advertised an all-inclusive price to act on a residential real estate transaction 

  If a lawyer advertised an all-inclusive price to act on a residential real estate transaction, the lawyer cannot charge a client for wire transfer fees in addition to the advertised price as wire transfer fees are not permitted disbursements. Lawyers whose costs are increasing due to their responsibility for payment of wire transfer fees on transactions may consider increasing their advertised fee on future transactions.
  
  If a licensee otherwise advertises a fee for legal services, the licensee should consult and comply with the applicable rules. If the licensee does so, the licensee may be able to charge the wire transfer fee as a disbursement, provided that the licensee also complies with the requirements below. 
  
  May be charged if no restrictions, licensee does not profit, fair and reasonable, and disclosed to client in a timely fashion
  
  If the licensee is not prohibited from charging the wire transfer fee as a disbursement, the licensee may do so in compliance with the applicable rules. The licensee must not charge the client more than the actual cost of the disbursement and the wire transfer fee must be fair and reasonable. The licensee must also disclose the fee to the client in a timely fashion. Disclosure should be provided to the client in writing, before or within a reasonable time after beginning representation and, in any event, in advance of the transaction or payment deadline so that the client has an opportunity to object. Disclosure should contain as much information about the fee as is reasonable and practical in the circumstances. As a best practice, licensees should consider including this disclosure in their engagement letter or retainer agreement or in any written fee estimate provided to the client.

• Confirm the method of payment and associated service fees with the licensee on the other side

  In order to avoid any misunderstandings or disputes, well in advance of the closing of a transaction or other payment deadline, licensees should confirm method of payment and shared understanding of the responsibility for associated fees with the licensee on the other side. As a best practice, licensees should do so in writing.

• Protect your client’s rights and interests
  A licensee’s failure to understand or plan for wire transfer fees should not result in the licensee delaying a transaction or payment which could negatively impact the client’s rights and interests in the matter.

There are a number of options for completing Form 9A:

• Print and sign. The lawyer or paralegal can control the entire electronic trust funds process by either completing the form on-line and printing it out for signature, or printing it out, filling it in and signing it. The rest of the electronic transfer is completed online, including receiving, printing, and completing the bank confirmation of the trust funds electronic transfer.

• Sign and scan. If there is more than one person involved in the electronic trust funds process and they are not working in the same location, then the lawyer or paralegal can complete the Form 9A, sign it, scan it, and email it to the person doing the entering and the second person doing the transfer.  After the transfer has been done, the persons completing the entering and transferring can in turn scan and send the confirmation back to the licensee to check, sign, date and add the client name and file number. The original signed Form 9A and confirmation should be maintained.

• Use an electronic signature. If the lawyer or paralegal does not have access to a printer or scanner, and is unable to sign the Form, then the use of an electronic signature to sign the Form 9A is permitted by the lawyer or paralegal. However, use of lawyers or paralegals’ electronic signatures should not be delegated to a non-licensee and lawyers and paralegals should be aware of the risks associated with electronic signatures.

Lawyers and paralegals should also implement strong access and security controls over the use of their electronic signature, such as using a strong password and two-factor authentication. For more information on passwords and two-factor authentication, review the Law Society’s Technology Practice Tips, specifically:

• Passwords (Transcript) (Download MP3)
• 2Factor (Transcript) (Download MP3)

• Document instructions. If the lawyer or paralegal is unable to employ the use of an e-signature or the use of scanners, the lawyer or paralegal could  document his or her instructions, include any forms (unsigned but completed online), and confirm that the instructions have been properly fulfilled.

Whatever method is adopted during COVID-19, lawyers and paralegals should maintain control over the access and use of their trust and general cheques. They should also consider reviewing their firm’s trust account on a daily basis. Under these extenuating circumstances, external or internal bad actors may attempt to take advantage.

For more information on the maintenance of signed electronic trust transfer requisitions (Form 9A) and signed printed confirmations of electronic trust transfers, review By-Law 9, s. 18(11); for requirements for electronic withdrawal of trust funds see By-law 9, s. 12. 

Last updated: March 25

If you have trust account activity and are continuing to use your trust account to receive or disburse client funds, consider:
 

• Sending scanned or electronic documents, using a secure e-mail, to your bookkeeper
• Keeping your financial records current yourself using the Law Society’s sample records as examples:
   
  • Bookkeeping Guide for Lawyers
  • Bookkeeping Guide for Paralegals  

Even if you are not using your trust account, you should continue to review the monthly bank statements to ensure there is no activity.

Last updated: March 24