No but it is required, pursuant to subsection 46(1) of the Legal Profession Regulation, that written notice be given to the Queensland Law Society of the opening of a trust bank account, within 15 days of the opening of the account.
Further information in relation to the opening of a trust bank account is available at http://www.qls.com.au/content/lwp/wcm/resources/file/ebacfe05c5a68e7/Opening%20a%20Trust%20Account.pdf
Sunday, May 31, 2009
What is the difference between controlled money and investment money?
Essentially, the only difference is how the money is dealt with in the trust accounting records.
Both controlled money and investment money are trust money that is invested on behalf of the client so that the client receives the interest earned on the money. Money held in a general trust does not earn interest for the benefit of the client. Interest on this money is paid to the Department of Justice & Attorney General's Legal Practitioners Interest on Trust Accounts Fund ("LPITAF").
If a client provides trust money to a law practice and instructs the law practice to invest the money so that the client receives the interest on the money, the law practice can either:
Both controlled money and investment money are trust money that is invested on behalf of the client so that the client receives the interest earned on the money. Money held in a general trust does not earn interest for the benefit of the client. Interest on this money is paid to the Department of Justice & Attorney General's Legal Practitioners Interest on Trust Accounts Fund ("LPITAF").
If a client provides trust money to a law practice and instructs the law practice to invest the money so that the client receives the interest on the money, the law practice can either:
- issue a trust account receipt, deposit the money to a general trust account, withdraw the money from the general trust account and deposit the money to an investment account opened in the name of the law practice as trustee for the client - the invested money will be accounted for in the Investment Register and must be returned to the general trust account before the money is distributed to the client or as the client directs; or
- issue a controlled money receipt, open a controlled money bank account in the name of the law practice as trustee for the client and deposit the money to that controlled bank account - the controlled money will be accounted for in the Controlled Money Register and can be distributed to the client, or as the client directs, from the controlled money account.
Friday, May 29, 2009
Calculation of Prescribed Account deposit when there is an existing deposit?
If a law practice has an existing deposit with the prescribed account, it is unlikely that the amount deposited in the previous calendar year would have been the same throughout the entire year.
If we assume that the law practice increased the amount deposited to the prescribed account on 16 January in the previous calendar year, the law practice will need to proceed in the following manner to determine the lowest combined balance held in that year:-
If we assume that the law practice increased the amount deposited to the prescribed account on 16 January in the previous calendar year, the law practice will need to proceed in the following manner to determine the lowest combined balance held in that year:-
- determine the lowest approved ADI statement balance during the period from 1 January to 15 January and add the amount of the prescribed account deposit during that period to determine the lowest combined balance held on any day during that period from 1 January to 15 January;
- determine the lowest approved ADI statement balance during the period from 16 January to 31 December and add the amount of the prescribed account deposit during that period to determine the lowest combined balance during the period from 16 January to 31 December; and
- calculate two-thirds of the lower of the two figures determined in 1. and 2. above to calculate the required deposit amount.
An example of how to calculate the required deposit amount when there have been a number of changes in the amount deposited to the Prescribed Account during the previous calendar year can be seen at:
Wednesday, May 27, 2009
External Examiner - reporting obligation if money disbursed by Electronic Funds Transfer (EFT)
A law practice can only disburse trust money by EFT if it has been approved to do so by the Queensland Law Society (QLS).
The Law Practice Statutory Declaration & Trust Money Statement (QLS Form 4 (LPR)) is to be completed by law practices and provided to external examiners prior to the commencement of the final examination. QLS Form 4 (LPR) requires a law practice to state whether funds were disbursed by EFT and whether the law practice has complied with the QLS' EFT Guidelines.
If trust funds were disbursed by EFT and the law practice did not have approval from QLS to do so, or did not comply with the QLS' EFT Guidelines, or stated in QLS Form 4 (LPR) that it had not disbursed trust funds by EFT, the External Examiner is required to report this at Item 2 of the External Examiner's Report (QLS Form 5 (LPR)).
It is suggested that the External Examiner should sight the letter of approval from QLS and the QLS' EFT Guidelines.
The Law Practice Statutory Declaration & Trust Money Statement (QLS Form 4 (LPR)) is to be completed by law practices and provided to external examiners prior to the commencement of the final examination. QLS Form 4 (LPR) requires a law practice to state whether funds were disbursed by EFT and whether the law practice has complied with the QLS' EFT Guidelines.
If trust funds were disbursed by EFT and the law practice did not have approval from QLS to do so, or did not comply with the QLS' EFT Guidelines, or stated in QLS Form 4 (LPR) that it had not disbursed trust funds by EFT, the External Examiner is required to report this at Item 2 of the External Examiner's Report (QLS Form 5 (LPR)).
It is suggested that the External Examiner should sight the letter of approval from QLS and the QLS' EFT Guidelines.
Where is there a definition of ADI
Schedule 2 of the Legal Profession Act 2007 (LPA) defines ADI to mean an authorised deposit-taking institution within the meaning of the Banking Act 1959 (Cwlth)
Section 237 of the LPA definies “approved ADI” to be an ADI approved by the Queensland Law Society (QLS) under section 280 of the LPA. A list of approved ADI's can be found on the QLS website at www.qls.com.au.
Section 237 of the LPA definies “approved ADI” to be an ADI approved by the Queensland Law Society (QLS) under section 280 of the LPA. A list of approved ADI's can be found on the QLS website at www.qls.com.au.
Does a new law practice get an exemption from making a deposit to the Prescribed Account until it has practised for at least 12 months?
No. All law practices that held trust money during the previous calendar year are required to make a deposit to the Prescribed Account unless exempted pursuant to section 70(5) of the Legal Profession Regulation 2007(LPR).
Section 70(5) of the LPR allows an exemption if the amount of trust money held on any day in the previous calendar year, after money was deposited to the trust account, was less than $3,000.
The required initial deposit to the Prescribed Account is two-thirds of the lowest approved ADI statement balance in the previous calendar year .
Section 70(5) of the LPR allows an exemption if the amount of trust money held on any day in the previous calendar year, after money was deposited to the trust account, was less than $3,000.
The required initial deposit to the Prescribed Account is two-thirds of the lowest approved ADI statement balance in the previous calendar year .
What is a law practice required to do to be entitled to withdraw trust money for legal costs?
A law practice may withdraw trust money for legal costs pursuant to one of the 2 procedures set out in subsections 58(3) and 58(4) of Legal Profession Regulation 2007 (LPR).
Subsection 58(3) only applies if a law practice has a costs agreement that authorises the withdrawal, OR the law practice has received instructions that authorise the withdrawal, OR the law practice is owed the money by the person by way of reimbursement of money already paid on behalf of the person.
In any of these 3 situations, a law practice may withdraw trust money for legal costs if the law practice, before withdrawing trust money, sends to the person whose money is to be withdrawn, a request for payment (section 58(3)(b)(i) of the LPR) referring to the proposed withdrawal, OR a written notice of withdrawal (section 58(3)(b)(ii) of the LPR).
Subsection 58(4) provides that a law practice may withdraw trust money for legal costs if a bill has been given to the person whose money is to be withdrawn and the person has not objected, within 7 days after being given the bill, to the withdrawal of the money.
Subsection 58(3) only applies if a law practice has a costs agreement that authorises the withdrawal, OR the law practice has received instructions that authorise the withdrawal, OR the law practice is owed the money by the person by way of reimbursement of money already paid on behalf of the person.
In any of these 3 situations, a law practice may withdraw trust money for legal costs if the law practice, before withdrawing trust money, sends to the person whose money is to be withdrawn, a request for payment (section 58(3)(b)(i) of the LPR) referring to the proposed withdrawal, OR a written notice of withdrawal (section 58(3)(b)(ii) of the LPR).
Subsection 58(4) provides that a law practice may withdraw trust money for legal costs if a bill has been given to the person whose money is to be withdrawn and the person has not objected, within 7 days after being given the bill, to the withdrawal of the money.
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