Best Practice When Issuing Trust Cheques
The Trust Safety team at the Law Society wants to remind Alberta lawyers to follow best practice when using forms of paper-based payment such as trust cheques. The Law Society does not guarantee trust cheques because we do not know the financial position of the lawyers’ clients that made the deposits. Additionally, the Alberta Lawyers Indemnity Association Group Policy does not cover financial loss due to overdrafts or trust shortages.
Paper-based payment instruments such as cheques, certified cheques, money orders and bank drafts are subject to forgery, fraud or can potentially be returned due to insufficient funds, holds, restrictions on deposits or stop payments. Prior to making a withdrawal from a trust, a lawyer must ensure that the client has sufficient money in trust to cover the withdrawal and the trust bank account has sufficient funds to permit the withdrawal to be completed. Failure to complete the second step is a common source of inadvertent trust shortages, where a payment is made before the necessary funds into trust have cleared the bank account.
To prevent these types of shortages, please follow best practice:
- Allow three to five business days for any paper-based payment instrument to clear the bank prior to making a withdrawal (the deposit slip from the bank does not guarantee that the funds have or will clear the bank and should not be solely relied upon); or,
- Receive funds by electronic payment as this method is guaranteed and often irrevocable.
For more information or if you have any questions regarding your trust accounts, please contact Trust Safety.