Most legal services offices will have at least one general account and one mixed trust account. It is important to understand what money goes into your trust account and what money goes into your general account.
Whenever you receive money:
you are receiving trust funds. Once you receive trust funds you must deposit them into a trust account by the end of the next banking day. In the case of an overpayment of your billed services, you must transfer the amount that belongs to you to your general account as soon as practical. Depending on the client’s instructions, you could either hold the overpayment in trust for the client for future fees and disbursements or return it to the client.
Whenever you receive money that is entirely:
you are not to pay it into your trust account. This money would normally be deposited into your general account.
You cannot rely on section 8(1)(a) of By-Law 9 to deposit funds to your general account. This section requires you to obtain a client’s written direction not to put the client’s funds in a mixed trust account. It is meant for clients who want their funds to be put in an interest bearing trust account which must be a separate account only for that client’s money. Trust money for future fees and disbursements must always be deposited to a trust account. It is not your money and therefore cannot be deposited to your general account.
A word about general monetary retainers (referred to in section 8(2)2 of By-Law 9)
Before deciding that a payment is a general retainer, you should be aware that the Law Society has established the following criteria for general monetary retainers:
- The onus is on you to establish that the retainer is a true general retainer.
- A written agreement between you and your client which describes the payment as a general retainer, will not be accepted as conclusive, and the circumstances surrounding the payment will be scrutinized carefully.
-
It will be concluded that a retainer is a specific retainer which must be deposited in your trust account where your client does not understand the nature of the general retainer agreement and intended the payment to cover specific legal services to be provided, and where the total amount paid by the client, including the general retainer, is comparable to your usual fee for the services provided.
General monetary retainers are extremely rare as clients are likely to expect that any payment to their paralegal is intended to go toward payment of their legal services fees.
Cash Receipts
When you receive cash, whether in trust or for your general account, you must prepare a duplicate cash receipt that identifies:
and containing:
There is a sample duplicate cash receipt in the Sample Books and Records section of this Guide: document #11.
Please note that you may not accept cash equivalent to $7,500 CDN or more, from a person with respect to any one client file except as permitted by section 6 of By-Law 9.
1. General Account
The general account is your firm’s operating account. This is the account you use to:
- deposit payments from clients you have billed for completed legal services
- pay your office expenses: rent, office supplies, staff salaries, bank charges, etc.
- pay disbursements on behalf of your clients
-
pay yourself.
No money belonging to clients should be in this account.
Try to avoid using a personal account as your office general account. Whatever bank accounts you use for your legal services practice must be produced on an audit. Personal accounts might not have the bank statements, returned cheques and duplicate deposit slips you are required to keep. For convenience it is usually best to have your general bank account at the same financial institution as your trust account.
2. Trust Accounts
The trust account is for your clients’ money, so if you do not receive trust funds in your legal services practice you do not need to open a trust account.
Trust accounts are the accounts you use to:
Avoid trust funds languishing in trust accounts. You should review your client trust ledger accounts monthly. Any amounts that you can bill and transfer to your general account or refund to the client should be done promptly. If your trust reconciliation shows cheques that have been outstanding for more than a few months, follow up with the payees to find out whether they received the cheques. Once a cheque is stale dated, (i.e. has not been cashed within six months from the date of the cheque), you should stop payment on the cheque, re-establish the liability in the client trust ledger account for the applicable client, and reissue the cheque if appropriate. If you are unable to locate the client, despite having made reasonable efforts to do so throughout a period of two years, you can apply to pay the money to the Law Society’s Unclaimed Trust Fund. Information on the fund and the Application Form can be found on the Law Society website.
Whenever you open or close a trust account, you must immediately inform the Law Society in writing of the location and account number of any account into which you have deposited client trust funds: By-Law 8 subsection 4(1)5. A sample Report on Opening or Closing a Trust Account can be found in the Appendices.
There are different kinds of trust accounts:
a) Mixed Trust Account
The most common type of trust account in a legal services office is called a “mixed” or “pooled” trust account. These trust accounts are any bank accounts that hold money for more than one client. When opening a mixed trust account, you must give a written direction to your financial institution to pay any interest on the account directly to The Law Foundation of Ontario. You should send a copy of this letter to The Law Foundation of Ontario. You must report annually on all mixed trust accounts, as well as the opening and closing dates (if applicable) through your Paralegal Annual Report. This information will be shared with The Law Foundation of Ontario. A sample Letter of Direction to a Financial Institution can be found in the Appendices.
Make sure that the agreement you sign when opening a mixed trust account directs the financial institution to deduct any service charges for your trust account from your general account, and does not allow the financial institution to remove any money from your trust account on its own. Note, however, that if you deposit a cheque to your trust account and it is returned “not sufficient funds” or NSF, your financial institution will deduct that amount from your account because your financial institution never received the money. Be careful not to disburse funds from your trust account on behalf of a client until the cheques for that client have cleared; that is, your financial institution has actually received the money from your client’s financial institution. You should check with your financial institution to find out how many days it requires to clear a cheque after you have deposited it.
Whenever you receive trust funds, you must immediately deposit them into a trust account that is in your name or in the name of the legal services practice where you are either a partner or an employee. You should deposit any trust money you receive by the end of the next banking day. If you have your own separate legal services practice but share office facilities in association with other paralegals, you must have your own separate trust account and separate books and records for your trust transactions. Your trust account should be clearly identified as “trust” on your bank statement and cheques.
You should contact your bank branch to update the information on the beneficiaries of any mixed trust accounts as of April 30, by May 30 each year for Canada Deposit Insurance Corporation (CDIC) purposes, as eligible deposits are insured up to a maximum of $100,000 per beneficiary (i.e. client) of the trust account. Please contact CDIC for details or consult the CDIC website for specific information about trust accounts and The Joint and Trust Disclosure By-Law.
b) Separate Interest Bearing Trust Account
This type of trust account holds trust funds for only one client. Typical separate interest bearing accounts are passbook accounts, GICs, and Term Deposits. The interest on these accounts belongs to the client and should be recorded in your trust receipt records as it is earned for each client. Similarly, any service charges are charged to the clients and recorded as disbursements for those clients.
If you expect you are going to be holding a large sum of money for a client for an extended period of time, you should discuss with the client whether he or she wants interest on the money. You should get the client’s instructions in writing as required by section 8(1)(a) of By-Law 9, taking care that the client is not looking to you for investment or financial advice.
Not all separate interest bearing accounts are guaranteed by CDIC, so you will want to be sure your client understands the nature of the investment and whether there will be sufficient funds available when the client needs them before accepting your client’s written instructions.
If the client does instruct you to put his or her money in an interest bearing account, consider whether the money will be required on short notice since some investments have reduced or no interest on early redemption. Also, decide how interest will be handled and record the client’s S.I.N. and/or corporate number for allocation of interest income. This money, however, must still be recorded in your trust records as it is your client’s money and considered trust funds for the purposes of By-Law 9.
If you are asked to hold disputed funds in an interest bearing account, consider getting written instructions from all parties that allow you to charge a monthly fee for administering the funds if the parties have not agreed on the disposition of the funds within a reasonable time, for example, three to six months.
Financial Institutions for Paralegals’ Mixed Trust Accounts
Your mixed trust accounts must be kept at one of the following institutions:
When opening a mixed trust account, check with the financial institution to make sure:
- it has an agreement with The Law Foundation of Ontario for the payment of interest on mixed trust accounts
-
it can provide you with the monthly bank statements and returned cheques, including certified cheques, as required by By-Law 9 (imaged cheques, clearly showing front and back of cashed cheques, which will eventually be provided by all financial institutions, are acceptable).
Maintaining Financial Records
You must keep your financial records available for the time periods set out in section 23 of By-Law 9. This means you must keep the records described in section 18 of By-Law 9 for:
1. The most recent six (6) full years plus the current year:
2. The most recent ten (10) full years plus the current year:
While By-Law 9 obliges you to keep your records current at all times, ensuring your financial records are accurate, legible, detailed, and up to date will help you to run your legal services practice more efficiently. It can be very costly both in time and money, and can damage your client relationships to let your records fall into arrears. See the “Sample Books and Records” section of this Guide for examples of how to prepare financial records required by section 18 of By-Law 9.
While section 21 of By-Law 9 permits you to keep your financial records electronically, you must be able to produce paper copies of your records for the Law Society for the time periods described above. We suggest you print your journals and records monthly to avoid the all too common problems with computer crashes, data corruption, and software update incompatibility. If you prepare any of your financial records by hand they must be permanent, for example prepared in ink, or prepared in pencil in draft then photocopied.
Keep in mind that whether you do your own record keeping, assign it to a staff member or retain a bookkeeper or accountant to maintain it, you, (and your partners if any), are responsible for ensuring that your office maintains the required records and follows the money handling requirements in By-Law 9. You should ensure that whoever is maintaining your accounting records is familiar with the Law Society’s By-Law 9. Some items you and your staff should be vigilant about are:
You should ensure that you have control of your accounting records at all times and that they are kept secure and confidential.
Consult the sample Internal Control Self Assessment Guide in the Appendices for these and other internal controls appropriate for your office, especially if you handle client trust funds, to ensure you and your staff are following the correct record keeping and money handling procedures.
Disbursing Trust Funds
It is important to have an audit trail, recording each step and preserving original and supporting documentation (source documents), for all transactions in a business, but especially if you handle client trust funds. A trust disbursement must always be initiated in writing by a paralegal licensed by the Law Society, who is permitted to handle trust funds. The signed written authorization, e.g. cheque, Form 9A, letter of direction to your financial institution, then becomes part of your accounting records. If you declare bankruptcy you are not permitted to handle or have trust accounts in your name (section 2 of By-Law 9).
Section 9 of By-Law 9 allows you to withdraw trust funds you are holding for a client for the following reasons only:
You may disburse trust funds by cheque, bank draft, and wiring funds through your bank. You may also use Internet banking if you follow the requirements of section 12 of By-Law 9. If you withdraw trust funds to pay your fees and/or disbursements, section 10 of By-Law 9 limits you to the follow methods: a cheque payable to you or your paralegal firm name, transfer to a non trust account, (i.e. general bank account), in your or your paralegal firm’s name, and electronic transfer. Withdrawing trust funds in cash is risky and should only be done on the client’s written instructions; you should always get a signed receipt from the payee. Always check your clients’ trust ledger to ensure you hold sufficient funds in trust for a particular client before disbursing funds for that client. You should confirm your financial institution’s holding periods on funds to be sure cheques you have deposited from clients have cleared and will not be returned NSF (not sufficient funds).
If you received fees, disbursements, expenses, or bail in cash, section 6(e) of By-Law 9 requires that you make any refund of those payments in cash.
1. Cheques vs Bank Drafts
You should be aware that cheques leave a better audit trail than bank drafts. Cashed cheques, including certified cheques, are your records and you must arrange for your financial institution to return them to you with your bank statements each month. Some financial institutions provide imaged cheques which are sent to you electronically. Bank drafts are the financial institution’s records. Financial institutions do not usually retain their original records for the ten year time period that you are required to keep your bank records. Returned cheques confirm that the funds have cleared and have the endorsement details on the back. Your copy of a bank draft will not confirm any of this information and you may have to spend time and money to obtain a copy of the bank draft from your financial institution to prove payment.
You must not issue trust cheques or bank drafts payable to “cash” or “bearer” (section 11 of By-Law 9) and you should withdraw cash from the trust account only when necessary (e.g. refunds of fees, disbursements, expenses, or bail paid in cash as per section 6(e) of By-Law 9), or on the client’s written direction. You should always get a detailed receipt signed by the payee for any cash disbursement.
2. Internet Trust Disbursements
If you disburse any funds by Internet banking, you must follow the procedure set out in section 12 of By-Law 9:
- complete a Form 9A for each client transaction (See the Appendices for a sample completed Form 9A)
(This Form must be signed by a person who has signing authority on your trust account. Except for exceptional circumstances, this must be a lawyer or paralegal licensed by the Law Society who is entitled to hold trust funds.)
- one person using a password, enters the transfer data as set out in the Form 9A
- another person with a separate password, authorizes the transfer
(A paralegal practising alone without employees may both enter the data and authorize the transaction.)
- print the electronic confirmation of the transaction that includes:
- your trust account number
- name, branch, and address of the account to which the funds have been transferred
- name of the account to which the funds have been transferred
- number of the account to which funds have been transferred
- time and date the transaction details and authorization were received by your financial institution
- time and date the confirmation of the transaction is sent to you from the financial institution
(While this confirmation must be obtained by the end of the next banking day, realistically it may not be available unless it is printed immediately.)
Both the Form 9A and printed confirmation should be kept in numerical order by requisition number with your financial records. You may want to keep a copy in the client’s file as well.
Client Identification and Verification Requirements – By-Law 7.1 Part III
As of December 31, 2008, subsection 22(1) of By-Law 7.1 requires that you obtain specific details identifying your clients for all new client matters; and if you receive, pay or transfer funds, or if you give instructions to receive, pay or transfer funds, then you are also required to obtain verification of the client’s identification. You should review section 23 of By-Law 7.1 for the specific identification and verification requirements and subsections 22(2), (3) and (4) for exemptions for certain licensees, types of funds, and certain clients. You should familiarize yourself with the definitions in section 20 and also for how long you must keep the client identification and verification information as set out in subsection 23(14) of the By-Law. There are sample completed identification forms for individuals and organizations in the Sample Books and Records and you can find more Law Society resources and further information on the Society website at: https://www.lso.ca/paralegals/practice-supports-and-resources/topics/the-paralegal-client-relationship/client-identification-and-verification-requirement
Billing Clients
In every matter, you should send invoices to the client containing a clear statement of what amount is owing, and providing adequate detail of the legal services you provided and any disbursements incurred on the client’s behalf. You should always send a final bill, but if the matter is lengthy it might be appropriate to send interim invoices, e.g. monthly. The invoice information should be recorded in a Fees Book detailing the fees charged to the client, other billings charged to the client, the date of billing and the client who is billed. Alternatively you can keep copies of the invoices in date order in a Chronological Billings File.
If you have money in trust to pay your invoice, then once you have completed the services you agreed to provide for the client and sent the client an invoice for those services, By-Law 9 section 9(1)(3) allows you to transfer the money to your general account. The invoice should be entered and posted in your financial records before you transfer money from Trust to General for earned fees.
A proper system of invoicing is not limited to practices where an invoice is required to release monies from Trust. When you provide services without having a monetary retainer paid in advance, it is still essential that you have a proper system of invoicing. Your invoices are the foundation upon which your billing and accounting records system is built.
Credit and Debit Card Payments
If you accept credit or debit card payments from clients, you must make arrangements with your financial institution to have retainers for future fees and disbursements paid directly into your trust account, and payments for your fee bills to clients, paid directly into your general account. You will likely need two merchant accounts to accomplish this. You cannot deposit both retainers and payments into one account, then immediately transfer the funds that do not belong in that account to your other account. If you accept both types of payment by debit card, you will have to use two machines, one for your trust account and one for your general account. See the Appendices for “Use of Credit Cards in The Legal Practice.”
If you use your own credit card to make a payment on behalf of a client, you should record the payment details in your general disbursements journal on the day you make the payment.
Automated Teller Machines
If your financial institution offers ATM access to your trust account, you may use it for deposits only. Ensure that your bank card is encoded for deposit only. Read the financial institution’s agreement carefully and make sure you understand the risks involved in using this method of deposit. In some agreements the depositor is responsible for the funds until they are received by a representative of the financial institution. You should always print a receipt of an ATM deposit and keep it with your deposit book along with a record of the source of the funds and the client reference.
Conclusion
We hope you find the information provided in this Guide helpful in maintaining the books and records of your practice. Remember it is your responsibility as a paralegal to ensure your practice is in compliance with the Rules of Professional Conduct and the Law Society’s By-Laws. Keeping clear, complete, and current financial records not only helps you to stay in compliance with the Law Society’s Rules and By-Laws, it will also make your practice operate more efficiently and allow you to provide better service to your clients. If you have any questions or comments on this Guide, please contact the Practice Management Helpline at 416-947-3315, toll free in Ontario 1-800-668-7380 ext. 3315, or visit the Law Society’s website at www.lso.ca.
Sample Books & Records
The following are examples of financial records described in By-Law 9, showing how you can record the typical kinds of transactions that occur in a legal services office.
1. Trust Receipts Journal: subsection 18(1) of By-Law 9
For each amount you receive in trust for a client, you must record:
Sample:
Paula Paralegal
Trust Receipts Journal
|
Date 2014
|
Funds
Received From
|
Client
|
Amount
|
Method of Payment
|
Purpose
|
|
Jul 12
|
Jane Piper
|
Piper - re: small claim court
|
300.00
|
Cheque
|
Retainer
|
|
Aug 3
|
Susan Silver
|
Silver - re: traffic
|
100.00
|
Credit Card
|
Retainer
|
|
Aug 9
|
Jane Piper
|
Piper - re: small claim court
|
125.00
|
Cheque
|
Retainer
|
|
Aug 16
|
Ali Said
|
Said - re: summary charge
|
600.00
|
Cert. Cheque
|
Retainer
|
|
Aug 18
|
David Silver
|
Silver - re: small claim court |
100.00
|
Cash |
Retainer |
2. Trust Disbursements Journal: subsection 18(2) of By-Law 9
For every payment you make from the trust account, you must record:
Sample:
Paula Paralegal
Trust Disbursements Journal
| Date 2014 |
Method /
Ref # |
Paid To |
Purpose |
Client |
Amount |
| Jul 30 |
ET # 0081 |
Paula Paralegal |
Agent fee |
Piper - re: small claim court |
282.50 |
| Aug 5 |
Cheque # 012 |
City of Toronto |
Set fine |
Silver - re: traffic |
325.00 |
| Aug 16 |
Cheque # 013 |
Minister of Finance |
Notice of Garnishment |
Piper - re: small claim court |
100.00 |
| Aug 23 |
Cheque # 014 |
Minister of Finance |
Set fine |
Said - re: summary charge |
500.00 |
| Aug 23 |
ET # 0082 |
Paula Paralegal |
Process serving fee |
Said - re: summary charge |
400.00 |
| Aug 27 |
Cheque # 015 |
Minister of Finance |
Plaintiff’s Claim |
Silver - re: small claim court |
75.00 |
Note: The trust receipts journal and trust disbursements journal can be combined into one journal, often called the “Trust Bank Journal.”
3. Clients’ Trust Ledger: subsection 18(3) of By-Law 9
Every time you record a trust receipt or payment in the trust receipts journal or trust disbursements journal, you must also record the receipt or payment for the specific client in the clients’ trust ledger, and calculate the unexpended balance for that client. This way you always know exactly how much you have in trust for each client.
Record every deposit to your trust account in the name of the client on whose behalf you received it. Do not put any of your, or your firm’s money, such as a float to cover bank charges, in your trust account. There should be no trust ledger accounts in your name, your firm name, or any other name such as “miscellaneous”, “suspense”, or “unknown”, that is not a client’s name. Each client’s receipts, disbursements and balance are listed separately so you know how much you have in trust for each client. For convenience, most firms set up separate client trust ledger accounts for each separate matter for the same client so there will be a separate card or account for each client matter. Together, these accounts make the clients’ trust ledger. You may keep copies of individual client trust ledger accounts for each client in the client files, but you must keep the entire ledger as part of your accounting records.
Sample:
Paula Paralegal
Client Trust Ledger
Account: PIPER, Jane - re: small claim court
| Date 2014 |
Particulars |
Receipts |
Disbursements |
Balance in Trust |
| Jul 12 |
Retainer - re: small claim court |
300.00 |
|
300.00 |
| Jul 30 |
Transfer to general Invoice # 0118 |
|
282.50 |
17.50 |
| Aug 9 |
Retainer - re: small claim court |
125.00 |
|
142.50 |
| Aug 16 |
Notice of garnishment |
|
100.00 |
42.50 |
Account: SAID, Ali - re: summary charge
| Date 2014 |
Particulars |
Receipts |
Disbursements |
Balance in Trust |
| Aug 16 |
Fine advance |
600.00 |
|
600.00 |
| Aug 23 |
Fine payment |
|
500.00 |
100.00 |
| Aug 23 |
Transfer to general Invoice # 0119 |
|
100.00 |
0.00 |
Account: SILVER, David - re: small claim court
| Date 2014 |
Particulars |
Receipts |
Disbursements |
Balance in Trust |
| Aug 18 |
Retainer - re: small claim court |
100.00 |
|
100.00 |
| Aug 27 |
Filing defendant claim |
|
75.00 |
25.00 |
| Aug 30 |
Transfer from S. Silver |
10.00 |
|
35.00 |
Account: SILVER, Susan - re: traffic
| Date 2014 |
Particulars |
Receipts |
Disbursements |
Balance in Trust |
| Aug 3 |
Retainer - re: traffic |
100.00 |
|
100.00 |
| Aug 5 |
Parking ticket payment |
|
90.00 |
10.00 |
| Aug 30 |
Transfer to D. Silver
|
|
10.00
|
0.00
|
4. Trust Transfer Record: subsection 18(4) of By-Law 9
Whenever trust funds are moved from one client’s trust ledger account to another client’s trust ledger account you must record the transfer and explain the purpose of the transfer.
Sample:
Paula Paralegal
Trust Transfer Journal*
| Date 2014 |
From Client |
To Client |
Amount |
Reason |
| Aug 30 |
Susan Silver - re: traffic |
David Silver -
re: small claim court |
10.00 |
Unused retainer, completed matter; on Susan Silver’s written direction |
* In this example, Susan Silver’s traffic matter is now over and she has already been fully billed for the services provided. She provided written instruction to Paula Paralegal to transfer her remaining retainer balance from the traffic matter to her son’s account for the small claim court matter that Paula Paralegal is also handling. A trust transfer entry is required for transfers between clients but not for matters for the same client, although you should get the client’s instructions before transferring the client’s funds to another matter for that client.
5. General Receipts Journal: subsection 18(5) of By-Law 9
For each amount you receive in your practice that is not trust money, record:
- date you received the money
- method by which you received the money
- person from whom you received the money
-
amount you received.
Sample:
Paula Paralegal
General Receipts Journal
| Date 2014 |
Funds Received From |
Amount |
Method of Payment |
| Jul 2 |
ACME Bank - re: Bank Loan |
2,500.00 |
Bank Draft |
| Jul 7 |
Stephen Bell - re: Inv # 0116 |
400.00 |
Cheque |
| Jul 12 |
Angela Finelli - re: Inv # 0117 |
169.50 |
Cheque |
| Jul 30 |
Transfer from trust - re: Piper, Inv # 0118 |
282.50 |
ET # 0081 |
| Aug 16 |
Stephen Bell - re: Inv # 0116 |
100.00 |
Cash |
| Aug 23 |
Transfer from trust - re: Said, Inv # 0119 |
100.00 |
ET # 0082 |
| Aug 30 |
Stephen Bell - re: Inv # 0116
|
65.00
|
Cash
|
6. General Disbursements Journal: subsection 18(6) of By-Law 9
For every payment you make in your practice that is not a trust payment, record:
Sample:
Paula Paralegal
General Disbursements Journal
| Date 2014 |
Method /
Ref # |
Paid To |
Particulars |
Amount |
HST Paid |
Total Paid |
| Jul 2 |
Cheque #51 |
Lucy Landlord |
Rent |
1,000.00 |
130.00 |
1,130.00 |
| Jul 12 |
Cheque #52 |
ABC Office Supplies |
Stationary |
200.00 |
26.00 |
226.00 |
| Jul 26 |
Debit from account |
Acme Bank |
Service Fees |
20.00 |
2.60 |
22.60 |
|
Aug 3
|
Cheque #53
|
Lucy Landlord
|
Rent
|
1,000.00
|
130.00
|
1,130.00
|
7. Clients’ General Ledger
By-Law 9 does not require this record, but it is useful for keeping track of all the expenses, invoices and payments for each client in one convenient record so you know how much each client owes you. As with the client trust ledger, the details of each separate client matter are usually posted to a separate card or account. We also recommend that you reconcile your general account(s) monthly.
Sample:
Paula Paralegal
Client General Ledger
Account: BELL, Stephen - re: small claim court
|
Date 2014
|
Particulars
|
Expenses Paid
|
HST
|
Fees
|
Payments from Client
|
Balance Owed
|
|
Jul 2
|
Fees – Inv # 0116
|
|
65.00
|
500.00
|
|
565.00
|
|
Jul 7
|
Client Payment
|
|
|
|
400.00
|
165.00
|
|
Aug 16
|
Client Payment
|
|
|
|
100.00
|
65.00
|
|
Aug 30
|
Client Payment
|
|
|
|
65.00
|
0.00
|
Account: FINELLI, Angela - re: traffic
|
Date 2014
|
Particulars
|
Expenses Paid
|
HST
|
Fees
|
Payments from Client
|
Balance Owed
|
|
Jul 2
|
Fees – Inv # 0117
|
|
19.50
|
150.00
|
|
169.50
|
|
Jul 12
|
Client Payment
|
|
|
|
169.50
|
0.00
|
Account: PIPER, Jane - re: small claim court
|
Date 2014
|
Particulars
|
Expenses Paid
|
HST
|
Fees
|
Payments from Client
|
Balance Owed
|
|
Jul 26
|
Fees – Inv # 0118
|
|
32.50
|
250.00
|
|
282.50
|
|
Jul 30
|
From Trust
|
|
|
|
282.50
|
0.00
|
Account: SAID, Ali - re: summary charge
|
Date 2014
|
Particulars
|
Expenses Paid
|
HST
|
Fees
|
Payments from Client
|
Balance Owed
|
|
Aug 17
|
Fees – Inv # 0119
|
|
13.00
|
100.00
|
|
113.00
|
|
Aug 23
|
From Trust
|
|
|
|
100.00
|
13.00
|
Account: SILVER, Susan - re: traffic
|
Date 2014
|
Particulars
|
Expenses Paid
|
HST
|
Fees
|
Payments from Client
|
Balance Owed
|
|
Aug 30
|
Fees – Inv #0120
|
|
6.50
|
50.00
|
|
56.50
|
8. Fees Book: subsection 18(7) of By-Law 9
When you invoice your clients, you can either record the information in a Fees Book or keep a copy of each invoice in chronological (date) order in a billings file. Many legal service firms keep both records. A ringed binder with tab dividers for each month works well for the billings file. If you keep a Fees Book, record the following information:
- fees charged to the client
- other billings charged to the client
- date of billing
-
client who is billed.
Sample:
Paula Paralegal
Fees Book
|
Date 2014
|
Inv #
|
Client
|
Fees Billed
|
Disbursements Billed
|
HST Billed
|
Total Billed
|
|
Jul 2
|
0116
|
Bell - re: small claim court
|
500.00
|
0.00
|
65.00
|
565.00
|
|
Jul 2
|
0117
|
Finelli - re: traffic
|
150.00
|
0.00
|
19.50
|
169.50
|
|
Jul 26
|
0118
|
Piper - re: small claim court
|
250.00
|
0.00
|
32.50
|
282.50
|
|
Aug 17
|
0119
|
Said - re: summary charge
|
100.00
|
0.00
|
13.00
|
113.00
|
|
Aug 30
|
0120
|
Silver, S - re: traffic
|
50.00
|
0.00
|
6.50
|
56.50
|
* No trust ledger accounts were created for Angela Finelli or Stephen Bell as no money is being received in trust for them. Paula Paralegal is simply billing these clients as services are being rendered, with no advance of a money retainer.
9. Trust Bank Reconciliation, Client Trust Listing, and Trust Comparison: subsection 18(8) of By-Law 9
The trust comparison compares:
a) your reconciled trust bank balance
b) your client trust listing total.
These two amounts must be the same. This is one of the most important trust records and you must complete it by the 25th of each month for all trust funds you held at the previous month’s end. You should correct any trust shortages immediately and correct any bank or posting errors before the next month end.
For the trust reconciliation:
- Check off all of the returned or imaged cheques on the trust bank statement for the previous month, noting any discrepancies in the amounts.
- From your trust disbursement journal, identify any cheques you have issued that do not show as cleared on the bank statement; these are your outstanding cheques.
- List the outstanding cheques by cheque number, date of issue, and amount, then total the amount.
- From your deposit book, check off all deposits on the bank statement noting any discrepancies in the amounts.
- List any deposits for the previous month, by date and amount, that are not recorded on the bank statement; these are your outstanding deposits.
- List any bank errors and/or posting errors individually by date of occurrence and provide a brief explanation; a copy of any supporting documentation, such as a bank memo, should be attached to your reconciliation.
-
From the balance on the trust bank statement, subtract the amount of the outstanding cheques, add any outstanding deposits, and adjust for any bank and posting errors to calculate your reconciled trust bank balance.
For the client trust listing:
Document the comparison of your reconciled trust bank balance with the client trust listing total. If these two amounts are not the same, you must find and correct the discrepancy.
Sample:
Paula Paralegal
Trust Bank Reconciliation as at August 31, 2014
Mixed Trust Account:
Balance per Bank Statement $ 643.50
Less: Outstanding Cheques (see list below) 575.00
Plus: Outstanding Deposits – 31Aug14 0.00
Plus: Bank Error – 11Aug14 9.00
Chq# 012 cleared as $99.00 s/b $90.00,
corrected 28Sep14 by bank credit memo
Reconciled Mixed Trust Bank balance at Aug 31, 2014 $ 77.50
Outstanding Cheques:
Cheque # Date Amount
014 23Aug14 $500.00
015 27Aug14 75.00
Total Outstanding Cheques: $575.00
Client Trust Listing as at Aug 31, 2014
(from clients’ trust ledger balances)
File Name Last Activity Date Amount
PIPER, Jane 16Aug14 42.50
SAID, Ali 23Aug14 0.00
SILVER, David 30Aug14 35.00
SILVER, Susan 30Aug14 0.00
Total client funds in trust: $ 77.50
Total trust liabilities to clients at Aug 31, 2014 $ 77.50
Trust Comparison as at Aug 31, 2014
Total Reconciled Trust Bank Balance $ 77.50
Total of unexpended balances per Clients’ Trust Ledger $ 77.50
Date Prepared: Sept. 21, 2014
Date Reviewed: Sept. 25, 2014
Signature: P. Paralegal
Regardless of who prepares the trust comparison, you should make it a habit to review the trust comparison and all supporting documentation by the 25th of each month to make sure:
Keep in mind the trust account is for your clients’ money, so if you do not receive trust funds in your legal services practice you do not need to open a trust account. But if you do have a trust account, you must prepare a trust reconciliation and trust comparison every month; even if the trust account has been inactive or if there is a zero balance in the trust account.
You may wish to review “Reconciling a Trust Account” https://www.lso.ca/paralegals/practice-supports-and-resources/topics/managing-money/trust-accounts/reconciling-a-trust-account.
10. a) Detailed Duplicate Trust Account Deposit Slip: subsection 18(10) of By-Law 9
By-Law 9 requires you to deposit any trust money you receive immediately into your trust account. You should record the following information on all your copies of trust deposit slips:
- date you deposit the funds
- your firm’s name if it is not preprinted
- your bank account number if it is not preprinted
- source of each receipt
- related client
-
amount.
You should also ensure that the teller stamps each deposit slip. If you use an automated teller machine, attach the ATM receipt to the corresponding deposit slip.
Sample:
BANK OF ONTARIO
Deposit slip
Credit Account of: Paula Paralegal, Trust Account
Date: 2010-08-30 “Teller Stamp” Depositor initials: PP
Transit #: 54321 Teller initials: ABC
Account #: 1234567890
|
Cheques and Credit Card
Vouchers
|
Details
|
Cash
|
|
Jane Piper
|
|
|
x $5
|
|
|
|
re small claim court
|
125
|
00
|
x $10
|
|
|
|
|
|
|
x $20
|
|
|
|
|
|
|
x $50
|
|
|
|
|
|
|
x $100
|
|
|
|
|
|
|
x
|
|
|
|
|
|
|
x
|
|
|
|
|
|
|
coin
|
|
|
|
|
|
|
Cdn Cash Total
|
|
|
|
Total ►
|
125
|
00
|
Credit Card Vouchers
and Cheques Forwarded
|
► 125
|
00
|
10. b) Detailed Duplicate General Account Deposit Slip: subsection 18(10) of By-Law 9
You should record the following information on all your copies of general deposit slips:
- date you deposit the funds
- your firm’s name if it is not preprinted
- your bank account number if it is not preprinted
- source of each receipt
- related client, if applicable
-
amount.
You should also ensure that the teller stamps each deposit slip. If you use an automated teller machine, attach the ATM receipt to the corresponding deposit slip.
Sample:
BANK OF ONTARIO
Deposit slip
Credit Account of: Paula Paralegal, General Account
Date: 2010-08-30 “Teller Stamp” Depositor initials: PP
Transit #: 54321 Teller initials: ABC
Account #: 1234567890
|
Cheques and Credit Card
Vouchers
|
Details
|
Cash
|
|
From Trust Account
|
|
|
x $5
|
|
|
|
re Said - inv #119
|
100
|
00
|
x $10
|
|
|
|
|
|
|
x $20
|
|
|
|
|
|
|
x $50
|
|
|
|
|
|
|
x $100
|
|
|
|
|
|
|
x
|
|
|
|
|
|
|
x
|
|
|
|
|
|
|
coin
|
|
|
|
|
|
|
Cdn Cash Total
|
|
|
|
Total ►
|
100
|
00
|
Credit Card Vouchers
and Cheques Forwarded
|
► 100
|
00
|
11. Duplicate Cash Receipts Book: section 19 of By-Law 9
For each cash receipt you receive in your practice, prepare a duplicate cash receipt with:
It is always advisable to sequentially number any accounting documents so your receipts should be numbered.
Give one copy of the receipt to the person who gave you the cash and keep one copy with your accounting records. You may also want to prepare the receipt in triplicate and keep the third copy in the client file.
By-Law 9 requires you to use reasonable efforts to obtain the signature of the person who gives you the cash. You should be wary of accepting cash from someone who does not want to sign a receipt.
Keep in mind that your staff may be reluctant to accept responsibility for receipt of cash payments. If you decide to make it a policy of your firm not to accept cash, or cash over a certain amount, be sure to notify potential clients in writing before accepting their retainers.
Sample:
DUPLICATE CASH RECEIPT
#0001
Date_________________
Rreceived from___________________________ the amount of $__________________
On behalf of__________________________________________ for file #___________
_________________________________ ___________________________________________________
Signature of payor [person paying cash] Authorized signature on behalf of [name of legal services firm]
|
|
12. a) Client Identification and Verification (individual client) - s 23 By-Law 7.1
Sample:
|
Paula Paralegal
VERIFICATION OF IDENTITY
(For use where the client or the third party is an individual)
Name: Kim Kirby
Address: 456 Avenue Rd Anytown ON Z9Y 4V3
Phone No: (789) 456-0123
Business Address: N/A (retired)
Business Phone No: N/A (retired)
Occupation(s) Retired real estate agent
Original Document Reviewed – Copy Attached
X Driver’s Licence
□ Birth Certificate
□ Passport
□ Other (specify type) _________
Meeting Date Identity Verified: Aug 30, 2014_________________________
Identity Verified By (Name of Person): Sandy Secretary
Date File Reviewed by Paralegal: Aug 30, 2014 __ _
Name of Paralegal: Paula Paralegal
|
12. b) Client Identification and Verification (organization) - s 23 By-Law 7.1
Sample:
|
Paula Paralegal
VERIFICATION OF IDENTITY
(For use where the client or the third party is an organization)
Name: Peter Piper Pickles
Business Address: 456 Avenue Rd Anytown ON Z9Y 4V3_______________
Business Phone No: (321) 654-0987
Incorporation or Business Identification No.: 12131415 Ontario Inc
Place of Issue of No: Ontario
Type of business or Activity: Produce wholesaler and retailer
Person Authorized to Instruct
Name: Peter Piper______________________________________
Position: President_______________________________________
Phone No.: (321) 654-0987 ext 1______________________________
Original Document Reviewed – Copy Attached
X Driver’s Licence
□ Birth Certificate
□ Passport
□ Other (specify type) __________ ________________________
Names and Occupation(s) of Directors
Peter Piper, farmer_____________________________________________
Jackie Jones, electrician________________________________________
Ricky Ricardo, musician_________________________________________
_____________________________________________________________
Names, Addresses and Occupation(s) of Owners or Shareholders owning a 25% interest or more of the organization or shares in the organization
Peter Piper, 456 County Rd Anytown ON Z9Y 4V3, farmer, 51%______________
Peter Piper Jr, 456 County Rd Anytown ON Z9Y 4V3, farmer, 49%____________
_________________________________________________________________
_________________________________________________________________
Original Document Reviewed – Copy Attached
X Certificate of Corporate Status
□ Annual Filings of the Organization (specify type) _______________________
□ Partnership Agreement
□ Trust Agreement
□ Articles of Association
X Other (specify type) Business Names Registration
Meeting Date Identity Verified: Aug 30, 2014_____________________
Identity Verified By (Name of Person): Sandy Secretary__________________
Date File Reviewed by Paralegal: Aug 30, 2014_____________________
Name of Paralegal: Paula Paralegal__________________
|
13. Valuable Property Record: subsection 18(9) of By-Law 9
This record is required to record trust assets other than money. The record should show, as a minimum, the following details:
- the name of the beneficial owner or owners
- a description of the property
- the date the property came into the paralegal’s possession or trust control
- the name of the person who had control of the property immediately before the paralegal took possession
- the value of the property
- the date that the trust was terminated by delivery or transfer of the property to, or on the direction of, the beneficial owner or owners
- the person to whom possession of property given.
Properties to be included:
Instruments registered in the paralegal’s name in trust:
- stocks, bonds or other securities in bearer form
- jewellery, paintings, furs, collector’s items or any variety of saleable valuables
- any property that a paralegal can convert, on his/her own authority to cash.
Properties not to be included:
Term deposits, deposit receipts, savings accounts or similar deposit accounts maintained for individual clients at chartered banks or registered trust companies. These are trust monies and must be recorded in the financial accounting records.
Sample:
Paula Paralegal
Valuable Property Record
|
Client
|
Description of Property
|
Date Received
|
Received From
|
Value of Property
|
Given To
|
Date Given
|
|
BELL, Stephen
|
pearl coloured necklace
|
01May14
|
BELL, Stephen
|
530.00
|
BELL, Allison
|
16Jun14
|
|
SILVER, Susan
|
silver coloured jewellery
|
02Jun14
|
SILVER, Susan
|
475.00
|
|
|
|
FINELLI, Angela
|
collector plates
|
07Jun14
|
FINELLI, Angela
|
320.00
|
|
|
Appendices
By-Law 9
Form 9A - Sample Completed Form 9A
Sample Letter of Direction to a Financial Institution
Report on Opening or Closing a Trust Account
Internal Control Self-Assessment Guide
Use of Credit Cards in The Paralegal Practice
Monthly Financial Review Checklist
Sample Completed Electronic Trust Transfer Requisition Form (Form 9A)
ELECTRONIC TRUST TRANSFER REQUISITION
Requisition #ET0081
Amount of funds to be transferred: $282.50
Re: PIPER small claim court
Client: Jane Piper
File No.: 08-47
Reason for payment: Fees ($250.00) and HST ($32.50) billed to client
Trust account to be debited:
Name of financial institution: Bank of Ontario
Account number: 123456789
Name of Recipient: Paula Paralegal, General Account
Account to be credited:
Name of financial institution: Bank of Ontario
Branch name and Address 20 Downtown St., City, ON Z9Y 2T2
Account number: 987654321
Person requisitioning electronic trust transfer: Paula Paralegal
Jul 30, 2014 Paula Paralegal
Date Signature
Additional transaction particulars:
Person entering details of transfer:
Name: Sandy Secretary Sandy Secretary
Signature
Person authorizing transfer at computer terminal:
Name: Bobby Bookkeeper Bobby Bookkeeper
Signature