Trust and controlled money accounts
What is trust money?
Trust money is the money a law practice holds on behalf of a client or other people in the course of, or in connection with, the provision of legal services. For example, where money is held for the payment of stamp duty during the purchase of property, or received from the proceeds of a court action.
How must a law practice handle trust money?
The Legal Profession Uniform Law governs how a law practice handles trust money. Under the Act law practices must:
- disburse trust money only as directed by the person on whose behalf it is held
- deposit trust money to a general trust account maintained with an authorised ADI in New South Wales, such as a bank, building society or credit union
- keep accurate records of their trust accounts and make them available for inspection by external examiners appointed by the law practice or Trust Account Investigator appointed by the Law Society
I have paid costs in advance. How is the money managed?
The law practice must deposit any costs you have paid in advance into a general trust account. Rules govern how a law practice can withdraw money for the payment of a cost. Generally the law practice can withdraw the money in accordance with your directions and advise you when an amount is to be withdrawn.
If you receive a bill from the law practice and want to challenge a withdrawal, you have seven days to make your objection known. If you do not lodge an application for a Cost Assessment with the Supreme Court of NSW within 30 days after being given the bill, the law practice will be able to withdraw the money from the trust account.
How are trust accounts checked?
The Law Society’s Trust Account Department has the responsibility for examining records maintained by law practices to ensure they properly account for the money received which is held on behalf of another person.
This involves trust account investigators visiting law practices throughout New South Wales on a regular basis in order to detect and prevent fraudulent practices. The Trust Account Department also assists law practices in complying with the legislation through the provision of education and assistance.
What can I do if trust money is not handled properly?
If you suffer financial loss due to the dishonest handling of trust money or property by a solicitor you may be able to make a claim for compensation through the Legal Practitioners Fidelity Fund.