By Sharon Blake -
A handy guide to help ensure that law practices across NSW comply with their trust accounting obligations.
- Trust money is not law practice money. Trust money must be kept separate from law practice money and only used for the purpose for which it was received.
- Before withdrawing trust money in payment of legal costs, you must issue a bill or written request referring to the proposed withdrawal. You need to wait a minimum of 7 business days after issuing the bill before you can make a withdrawal, unless disputed or the client consents to an earlier withdrawal.
- All trust withdrawals must be authorised.
- Monthly trust account reconciliations are mandatory. You must reconcile the trust cash book, trust ledger and bank statements every month, even if there were no transactions.
- Trust accounts must be externally examined annually. The External Examiner can be appointed using the Trust Lodgement Portal and they will submit their report through the Portal also.
- You must keep all trust records for at least 7 years. This includes receipts, ledgers, reconciliations, bank statements and client instructions.
- Overdrawing a client’s trust ledger is a breach, even by $1.
- Use compliant trust accounting tools or software which are capable of producing all required trust records.
- Use approved ADIs. The approved list is on the Law Society website: List of Authorised Deposit-Taking Institutions.
- You are responsible, even if someone else (e.g. bookkeeper) manages the account day-to-day. Principals are responsible for trust compliance, regardless of delegation.
Need guidance?
The role of the Trust Accounts Department is to ensure that law practices across NSW comply with their trust accounting obligations and encourage all practitioners seeking guidance on their trust obligations to contact the Trust Accounts Department: trust@lawsociety.com.au.
