by Safiyya Vankalwala

Your trust account is not a bank account, and you are not a banker. LAWPRO has seen instances where lawyers appear to be using their trust accounts to flow money in and out without doing any legal work.

What Your Trust Account Is Not

  1. A backdoor bank account: Your trust account is not a workaround for clients who wish to avoid opening their own bank accounts for fund transactions. It is not a shortcut to bypass standard banking procedures.
  2. Personal piggy bank: It is not a repository for clients to deposit personal funds (for example, to prevent spending).
  3. A family/friend loan channel: Trust accounts should not serve as a conduit for clients to lend money to family members or friends.

REMINDER: The trust account should be utilized exclusively when retained for legal services.

Insurance coverage: Your Professional Liability Insurance covers you for errors, omissions, or negligent acts in the performance of Professional Services. Permitting misuse of your trust account may result in financial liability to you.

Trust account misuse example:

A former client, Jane, asked her lawyer to help her lend money to a relative to purchase a house. The lawyer agreed despite not representing either party in the real estate deal.
The lawyer deposited a cheque from Jane and then wrote cheques from his trust account to various parties for the house purchase, as directed by the client. The lawyer did not take the time to confirm with the bank that the cheque had cleared or that it was genuine. It turned out that Jane’s cheque bounced, resulting in the lawyer’s trust account being drained and, inadvertently, misusing funds belonging to other clients.

This scenario highlights the importance of maintaining control of your trust account, regardless of your familiarity with a client or external pressures.

Take the time to reflect on your role concerning funds in your trust account. There must be an underlying transaction in which the lawyer provides legal services. Don’t risk your insurance coverage because you let your trust account be misused.