This Q&A with a conveyancer guides you in understanding how trust accounts work.
Khairiyah Safeda, Founding Director of legal and conveyancer firm Safeda & Associates, provides comprehensive answers to the most frequently asked questions about trust accounts.
Q1: What is a trust account?
A trust account is a separate bank account opened and managed by a legal practitioner or law firm, regulated under the Legal Practice Act. It is used to hold money on behalf of clients or third parties — such as deposits for property transactions or legal settlements. The money in a trust account does not belong to the legal practitioner and can only be used for the purpose it was received.
Q2: How do they work?
Funds deposited into a trust account are held separately from the firm’s business account. Detailed accounting records must be maintained for each individual client's funds. Funds are only transferred from the trust account to the business account once they are earned or disbursed on the client’s instruction.
Q3: Is there a separate trust account for each client?
Generally, firms operate one pooled trust account, but maintain internal records showing each client’s balance individually within that account.
Q4: How does a client know that the trust account is safe?
Trust accounts are regulated by the Legal Practice Council (LPC). Firms undergo annual audits and comply with strict accounting standards. The Legal Practitioners' Fidelity Fund (LPFF) protects clients against losses from theft or misuse of funds by legal practitioners.
Q5: What happens if there's a breach or hack?
If funds are stolen or misused, clients may claim compensation from the LPFF. A formal process must be followed, and certain conditions and limits apply.
Q6: Does the money earn interest?
Yes. General trust account interest goes to the LPFF. Clients can request interest-bearing 86(4) accounts for their own benefit, usually for large or long-term deposits.
Q7: Who decides how trust money is used?
The client does. Funds can only be used as instructed — e.g., to pay the seller, SARS, municipality, or conveyancer. Excess amounts must be refunded unless new written instructions are given.
Q8: What is the safest way to make a deposit?
Due to fraud risk, always confirm banking details in person or via verified phone call. Never trust emailed bank details alone.
Q9: Can deposits be made in installments?
Yes, if it aligns with the purpose — e.g., staged legal payments or partial deposits for property-related costs.
Source: Understanding Conveyancing Costs
