3. Trust accounts
(Sections 6, 110, 299 of the Act; Regulations 3, 6)
Trust Account Guidelines contents
Trust accounts
3.1 A trust account is defined in s6 of the Act as meaning, in relation to a practitioner or incorporated firm, “any trust account at a bank in New Zealand that is a trust account in the name of that practitioner or incorporated firm”.
3.2 Trust bank accounts must be designated "trust account", and you must put the bank and other interested parties on notice that the money in each trust bank account is trust money.
3.3 You must nominate trust bank accounts (other than Interest Bearing Deposit (IBD) Accounts) by written notice to the bank that holds the accounts. The bank will credit 60% of the notional interest calculated on that trust bank account to the Lawyers and Conveyancers Special Fund Account. The money in the Special Fund is distributed to the Legal Services Agency to fund community law centres. The bank retains the other 40% of the interest in lieu of bank charges on the nominated trust bank account. Accordingly, when you have nominated your trust bank accounts to the bank under s299 of the Act, the bank, under s301(5) of the Act, is not entitled to charge bank fees in respect of those accounts.
Errors and overdraws
3.4 The trust bank account is the repository for client money. Therefore, it should never be overdrawn, nor should it be at risk of being overdrawn, for example, by paying out from a client's cheque where there is a possibility of it being dishonoured.
3.5 Where an inadvertent overdraw or other error occurs, it must be corrected promptly. Pending correction, any overdrawn balance must be made good from the practice’s own funds (Regulation 6).
3.6 Overdraws that are caused by administrative or accounting errors and promptly corrected should be reported briefly in the monthly certificate as an exception under Item 2.