Solicitors Trust Accounts are regulated by the Legal Profession Act 2004 and the Legal Profession Regulation 2005. These laws are in place to regulate the conduct of money held in Trust for clients. Such money might include funds required to settle property purchases, to pay stamp duty, for distributions in deceased estates, for debts recovered, for settlement of claims, or funds required to pay legal expenses.
Trust accounts are subject to external examination every year, as well as periodic random audits by the Law Society’s Trust Department. These external examiners and auditors will check transactions through the Trust accounts to ensure they comply with the Regulations.
Solicitors are required to have written instructions to transfer funds from the Trust account. Often these instructions are incorporated into the Costs Agreement the firm enters into with the client. Also, a Solicitor may provide a Bill to a client, and advise that funds held in Trust for the purpose of meeting their legal costs will be transferred in settlement of the account unless an objection is received within a specified period.
Contrary to a common misconception, Solicitors do not earn any interest on clients funds held in their Trust account. In this state, all interest earned on funds in Solicitors Trust accounts is paid directly to the Law Society of New South Wales.
Clients may decide, particularly if a significant amount is involved for a lengthy period, to instruct their Solicitor to deposit their Trust funds into a Controlled Money account to earn interest on their money whilst it remains under the control of the Solicitor. To do so, the Client must provide written instructions to their Solicitor, which includes nominating the institution and type of account to be used.
On completion of a matter where there were Trust transactions, the Solicitor is required to provide a Trust Statement to the Client. Also, on 30 June each year, subject to some exceptions, the Solicitor is required to provide Trust Statements to all Clients where there has been Trust transactions within the preceding 12 months.
Should you have any queries about Trust accounts we would be happy to discuss them with you because Helping You is Our Business.
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