What is a Solicitors Trust Account?

Kylie explains below what a Solicitors Trust Account is.

A solicitors trust account is a designated bank account used when solicitors receive and hold money on behalf of clients or third parties.  It is set up and run in accordance with the rules of the New Zealand Law Society and is audited by the New Zealand Law Society.

When acting for a client a solicitor takes on the role of fiduciary (someone who manages money or property on someone’s behalf).  As fiduciary, a solicitor can receive funds that belong to a client or third party.  This money must go into a trust account.  It does not go into a lawyer’s personal bank account.

A solicitor must maintain a separate client ledger for each client who has money in the trust account.  The client ledger shows all funds transacted through the trust account for that client and a statement for these transactions will be provided to the client.

New Zealand law provides that any money held in a solicitors trust account will not earn interest. If however funds are going to be held for any length of time, funds can be transferred to an interest bearing deposit. All interest earned has withholding tax deducted with net interest earned paid to the client.

Some examples of where funds would be held in a solicitor trust account are property transactions, Estate proceeds and relationship property settlements.