Opening a Trust Account



What are the requirements for a mixed trust account?
Am I required to open a mixed trust account?
I am a lawyer who acts in real estate matters. Am I required to open a separate trust account for Teranet electronic registrations (e-regTM)?
Am I permitted to open a foreign funds mixed trust account, such as a US dollar mixed trust account?
How many trust accounts may I open?
What financial institutions may I use for a trust account?
What will the financial institution require of me to confirm that I am licensed by the Law Society of Upper Canada and entitled to open a trust account? 
 



Q:What are the requirements for a mixed trust account?

 

A:For each mixed trust account you open

  • the account must be at a chartered bank, provincial savings office, registered trust corporation, or a credit union or a league to which the Credit Unions and Caisses Populaires Act, 1994 applies, per section 7(1) of By-law 9
  • the account must be clearly designated as a lawyer's or paralegal's trust account
  • the account must be in your name or the name of your firm, partnership, professional corporation or trade name
  • the account must bear interest at a rate approved by the trustees of the Law Foundation of Ontario, per section 57(1) of the Law Society Act
  • you must direct the financial institution to remit the interest earned on the account to the Law Foundation of Ontario (see Letter of Direction Regarding Interest on a Mixed Trust Account)
  • you must report to the Law Foundation of Ontario that you have opened the account (see Form 2: Report on Opening a Mixed Trust Account)
  • you must report annually to the Law Foundation of Ontario regarding the account (see Form 1: Annual Report to the Law Foundation of Ontario)
  • you must report to the Law Foundation of Ontario when you close the account (see Form 3: Report on Closing a Mixed Trust Account)
  • you must ensure that the financial institution provides the appropriate source documents for the account, per By-law 9 (e.g. cancelled trust cheques or full electronic images of cancelled trust cheques)
  • you must ensure that the financial institution does not withdraw funds from the account without your authorization (e.g. service fees must be paid from the general account)

If your chosen financial institution does not permit you to fulfill any of these requirements for a mixed trust account, you may be precluded from using that institution for this purpose. For more information, see the Law Society's How-To Brief on Opening and Operating a Trust Account.

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Q: Am I required to open a mixed trust account?

A: It depends. Section 7(1) of By-law 9 requires that licensees who receive money in trust for clients must, unless otherwise exempted by the By-Laws, deposit the money into a trust account. If, for example, you plan to accept retainer fees or hold settlement funds for clients, you must deposit these funds to a trust account. If the only funds you receive from clients are payment for disbursements you have already incurred on behalf of the client or payment of your fees for services you have rendered and billed to the client, a trust account will not be required.

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Q: I am a lawyer who acts in real estate matters. Am I required to open a separate trust account for Teranet electronic registrations (e-regTM)?

A: You can choose to use either a special mixed trust account or a general account to allow Teranet to make electronic withdrawals of registration fees and Land Transfer Tax for electronic registrations. Currently, Teranet requires you to choose one account from which to authorize electronic withdrawals.

If you choose to use a general account, you must authorize Teranet to withdraw your firm's funds from a firm general account. Once the registration process is complete, you may transfer the client's funds from the trust account to reimburse your general account. You may not transfer the client's funds from the trust account to your general account until after you have authorized Teranet to withdraw the registration fees and Land Transfer Tax.

If you choose to use a trust account for Teranet withdrawals, you must follow the procedure in sections sections 15, 16 and 17 of By-law 9. You must set up a separate special mixed trust account into which you deposit, or transfer, the exact amount required for registration fees and Land Transfer Tax. The funds for any particular transaction may stay in the e-reg trust account for a maximum of five days. Form 9B must be completed for each transaction to authorize the withdrawal by Teranet. You must receive written confirmation from Teranet by 5:00 p.m. of the banking day following the registration and compare each Form 9B with the corresponding Teranet confirmation by 5:00 p.m. of the second banking day following the registration. The e-reg trust account must be reconciled and included in your monthly trust comparison as required by section 18(8) of By-law 9.

More detailed information on use of electronic registration bank accounts for Teranet withdrawals can be found in the Law Society article, Payment of Registration Fees and Land Transfer Tax (pdf).

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Q: Am I permitted to open a foreign funds mixed trust account, such as a US dollar mixed trust account?

A: There is nothing in By-law 9 that prohibits you from opening a foreign funds account, for either a trust account or a general account. However, where you wish to open a foreign funds account for mixed trust account purposes, the account must meet the requirements of any mixed trust account. For any mixed trust account you open  

  • the account must be at a chartered bank, provincial savings office, registered trust corporation, or a credit union or a league to which the Credit Unions and Caisses Populaires Act, 1994 applies, per section 7(1) of By-law 9
  • the account must be clearly designated as a lawyer's or paralegal's trust account
  • the account must be in your name or the name of your firm, partnership, professional corporation or trade name
  • the account must bear interest at a rate approved by the trustees of the Law Foundation of Ontario, per section 57(1) of the Law Society Act
  • you must direct the financial institution to remit the interest earned on the account to the Law Foundation of Ontario (see Letter of Direction Regarding Interest on a Mixed Trust Account)
  • you must report to the Law Foundation of Ontario that you have opened the account (see Form 2: Report on Opening a Mixed Trust Account)
  • you must report annually to the Law Foundation of Ontario regarding the account (see Form 1: Annual Report to the Law Foundation of Ontario)
  • you must report to the Law Foundation of Ontario when you close the account (see Form 3: Report on Closing a Mixed Trust Account)
  • you must ensure that the financial institution provides the appropriate source documents for the account, per By-law 9 (e.g. cancelled trust cheques or full electronic images of cancelled trust cheques)
  • you must ensure that the financial institution does not withdraw funds from the account without your authorization (e.g. service fees must be paid from the general account)

If the foreign funds account you wish to use does not permit you to fulfill any of these requirements, you may be precluded from using that type of account for this purpose.

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Q: How many trust accounts may I open?

A: Section 7(5) of By-law 9 provides that a licensee may keep one or more trust accounts. Usually, lawyers and paralegals have one mixed client trust account into which retainers and other sums held for clients are to be deposited. Additionally, a lawyer or paralegal may be called upon to handle in trust, more sizable amounts of funds for extended periods of time. In order to fulfill their duties as prudent fiduciaries, lawyers or paralegals holding large amounts in trust for clients should discuss with their clients opening separate interest bearing trust accounts, (passbook accounts, term deposits, GICs). The interest on these separate interest bearing accounts accrues to the benefit of the client, provided the client gives written instructions.

Note that a separate interest bearing trust account must not hold trust money for more than one client, otherwise it is deemed to be a mixed trust account and the interest on the account must be paid to the Law Foundation of Ontario, per section 57(1) of the Law Society Act.

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Q: What financial institutions may I use for a trust account?

A: Section 7(1) of By-law 9 provides that a trust account must be at a chartered bank, provincial savings office, registered trust corporation, or a credit union or a league to which the Credit Unions and Caisses Populaires Act, 1994 applies. Lawyers and paralegals must ensure that the financial institution they choose for a trust account will allow them to comply with the requirements of section 57(1) of the Law Society Act (e.g. the trust account earns interest at the prescribed rate) and the record keeping requirements of section 18(10) of By-law 9 (e.g. the trust account provides the appropriate source documents).

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Q: What will the financial institution require of me to confirm that I am licensed by the Law Society of Upper Canada and entitled to open a trust account?

A: This will depend on the financial institution. The institution may request a Law Society of Upper Canada Photo ID Card or a third party Status Letter from the Law Society to confirm that you are licensed by the Law Society as a lawyer or a paralegal and that you are either entitled to practice law or provide legal services. Speak with a representative of your chosen financial institution to confirm their requirements.

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