Your Obligations
Interest on (Pooled & Restricted) Trust Accounts
Clients earn interest on their trust funds when they direct their lawyer to place them in a separate interest-bearing account. But have you ever wondered about whether interest is earned on your law firm’s pooled or restricted trust accounts? It’s a detail that often goes overlooked, especially since these accounts may have been set up before you joined the firm and are managed by your firm’s Trust Account Supervisor.
Back in 1986, changes to The Law Society Act in Manitoba created the Foundation and clearly stated that any interest earned on lawyer pooled trust accounts belongs to Foundation. This arrangement has been in place for over 40 years and continues today, under The Legal Profession Act.
Practically, your law firm instructs its bank or credit union to pay the interest earned (after deducting service charges) on these accounts to the Foundation by way of a signed Letter of Direction (LOD) when the trust account is opened. The LOD is a standard form set by The Law Society in collaboration with the Foundation. Every time a lawyer or law firm opens a new trust account, they need to provide this signed LOD to their financial institution, as well as copies to The Law Society and the Foundation.
How You Can Help
The Foundation collaborates with banks and credit unions to secure favourable interest rates and service charges for lawyers’ pooled and restricted trust accounts in Manitoba. Your choice of where to hold your trust account(s) directly impacts the revenue earned by the Foundation. These interest rate arrangements, often linked to the prime rate, vary among financial institutions.
Moreover, while financial institutions cannot directly levy service or transaction fees on your account, they can deduct them from the interest paid to the Foundation. While some institutions waive fees entirely, others impose significant charges.
Banks and credit unions value their relationships with law firms, which frequently maintain substantial balances across their accounts. These relationships offer an opportunity to advocate for better interest rates and reduced service fees on behalf of the Foundation.
If you’re opening a new trust account and are curious about the rates and fees in place with any given bank or credit union, please reach out to us.
Together, we can enhance the revenues generated from lawyer trust accounts. This translates to increased support for Legal Aid Manitoba, The Law Society of Manitoba, and other impactful programs, grants, and initiatives benefiting Manitobans. It also contributes to the Foundation’s long-term financial resilience, enabling us to navigate economic uncertainties and sustain our valuable work for years to come.