Monthly trust reconciliations for Ontario lawyers and paralegals

Each month, for your trust comparison, you must compare: (a) your reconciled trust bank balance and (b) your client trust listing total. These two amounts must be the same. This is one of the most important trust records and you must complete it by the 25th of each month for all trust funds you held at the previous month’s end. You should correct any trust shortages immediately and correct any bank or posting errors before the next month end.

TrustReq makes it easy to perform this task each month.

For the trust reconciliation:

• check off all of the returned (or imaged) cheques on the trust bank statement for the previous month, noting any discrepancies in the amounts

• from your trust disbursement journal, identify any cheques you have issued that have not yet cleared the bank

• list the outstanding cheques by cheque number, date of issue, payee, and amount and total the amount

• from your deposit book, check off all deposits on the bank statement noting any discrepancies in the amounts

• list any deposits for the previous month, by date and amount, that are not recorded on the bank statement; these are your outstanding deposits

• list any bank errors and/or posting errors individually by date of occurrence and provide a brief explanation; a copy of any supporting documentation, such as a bank memo, should be attached to your reconciliation

• from the balance on the trust bank statement, subtract the amount of the outstanding cheques, add any outstanding deposits and adjust for any bank and posting errors to calculate your reconciled trust bank balance

For the client trust listing:

• from the clients’ trust ledger, identify any client for whom you held trust funds at the previous month end

• list the client names in a logical order, with the unexpended trust balance for each client as at the previous month end

• include the last activity date for each client’s trust balance on the client trust listing to help you to monitor inactive or dormant amounts

• total the client trust listing

Compare your reconciled trust bank balance with the client trust listing total. If these two amounts are not the same, you must find and correct the discrepancy.

See an example on the Law Society of Ontario's website here.

Regardless of who prepares the trust comparison, you should make it a habit to review it and all supporting documentation by the 25th of each month to make sure:

• the comparison has been completed on time

• all client trust funds are included: mixed, pass book, GICs, term deposits, e-reg©, estate, power of attorney, etc.

• bank statement, passbook, estate account, GIC, term deposit etc. balances are correct

• the arithmetic is correct

• reconciling items, e.g. bank errors, posting errors, are cleared each month and are explained and supported by documentation

• stale dated cheques, i.e. cheques that have been outstanding for more than 6 months, are reversed, the client liability reinstated in the clients’ trust ledger and the cheque reissued if appropriate (Note that clearing rules state that a cheque more than six months old may be cashed so check your financial institution’s policy to determine whether you should put a stop payment on a trust cheque before reissuing it.)

• there are no overdrawn client trust ledger accounts

• the amounts in trust for each client are correct

• any client trust ledger accounts that have not had any activity in the previous 12 months are followed up