When you begin your new law practice, you will need to open a bank account to receive money in connection with the operation of your practice. Whether or not you will also need to open a trust account will depend on the nature of your practice and on how money will flow into your practice. According to the definition of ‘trust money’ in the Uniform Trust Account Rules under the Law Society Act, 1996, hereinafter the ‘Rules’, any of the following types of money must be deposited in a trust account:
money received that belongs in part or in whole to a client, or that you hold on behalf of a client, or at the direction or order of a client;
money paid to you by a client for fees for services you have not yet performed (a retainer for future services), or for disbursements not yet made; and
money over which you have sole signing authority or control with respect to the administration of an estate or a trust, as a guardian or under a power of attorney.
If the nature of your practice is such that you only receive money from clients as payment for legal fees and disbursements after they are performed and incurred, and that you do not hold any money on behalf of clients, you may not need to operate a trust account. However, if you receive any money that does not belong to you, including money received from clients for legal services that you have either not yet billed for or not yet performed, you must operate a trust account. Other examples of funds that must be deposited in a trust account include deposits received from a purchaser under an agreement of purchase and sale; any amount paid by the client in excess of what you have billed; and settlement funds held pending completion of conditions.