Solicitors - interest on client accounts

If solicitors have to do it the same as accountants then a sum of that size and for that length of time should have been held in a separate designated account specifically for that client alone. That will make any interest earned easily attributable. 

Bare in mind that current account interest rates are still pretty low though so it might not be much.

I'd just ask them how much money that account earned in interest, they should.be able to produce a statement to show this. BITD when I was looking after client accounts they all had to be reconciled to the penny every month and then my reconciliations signed off by the senior partner. They were checked by the regulator, ICAEW in our case, will be different for solicitors, every two years. Client monies are a pain in the bottom but have to be done properly.

From my memory of local solicitors' accounts holding accounts at the bank I worked at, they'd have a single 'clients' account where all client money was held They did not have one account per client.

I doubt they have any obligation to earn or offer interest in client money, in fact it's probably the opposite.

A quick Google finds this

https://www.sra.org.uk/sra/news/sra-update-126-interest-rates/

That's very different to how we did it. There was a 'general.account' for small.amounts/very short term but that amount should have had a specific account, especially if held for that length of time. Usually had a dozen or so, most of which were empty, so could be used immediately a client wanted one, once emptied again it would sit there until another client needed it, opening new ones each time would have been a faff.

There's no obligation to earn interest, security being the number one priority, but any earned belonged to the client and not the firm (Edit as per IHN's post - unless otherwise agreed with the client)

But as I say, maybe solicitors are different from accountants, I don't know🤷

Thanks IHN, it's certainly not a conversation I've had but could be buried in their t & C's, will bring it up before the accounts are settled and see what they say.

Posted by: andrewh

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That's very different to how we did it. There was a 'general.account' for small.amounts/very short term but that amount should have had a specific account, especially if held for that length of time. Usually had a dozen or so, most of which were empty, so could be used immediately a client wanted one, once emptied again it would sit there until another client needed it, opening new ones each time would have been a faff.

There's no obligation to earn interest, security being the number one priority, but any earned belonged to the client and not the firm (Edit as per IHN's post - unless otherwise agreed with the client)

But as I say, maybe solicitors are different from accountants, I don't know🤷

Pretty much this..the solictors have to hold the money in a 'safe' 'client' account. that might mean zero or very low interest.

You'd rightly be pissed off if they put it all on the the S&P500 and lost you 25% of the value of the account.

So basically when it's with solicitors I wouldn't expect much, if any interest...the solictors have to liquidate all the accounts as part of the estate account reconciliation.

You'd rightly be pissed off if they put it all on the the S&P500 and lost you 25% of the value of the account.

True but there is a significant difference between doing that & placing it in a low interest cash account, I've been getting around 4% from cash in the bank which would have amounted to £7.5k in this example - but as I said I'll ask & see what they say, seems like professional advice is that solicitors themselves shouldn't benefit but doesn't mean they are obliged to place money in an interest earning account especially when they wouldn't know how long it would end up being held for.

Many years ago I got a surprise extra payment from a solicitor who held money for a few weeks and made interest on it so rightly passed it on.  In recent similar circumstances I hinted at my solicitor they may have overlooked this - and they advised that their bank didn’t pay interest on the type of account they use for client accounts, in return it has other benefits like lower/no transaction fees.   

We hold money for clients in client accounts. The main purpose is that the money is safe, protected and separated from the firms main accounts in case we went bust.

They do carry a small amount of credit interest - Currently 1.6% (although this is reducing) this is taxable in the estate as income at 20% and is also used to offset any bank charges. The rates would have been similar in the period you were talking about.

Some firms use client accounts that carry no interest. 

We would credit any surplus to the estate.

Received a response from solicitors today, apparently there will be interest added to the account but they only calculate that at the very last moment - which does make perfect sense.

Although their ineptitude in other matters is still shining through....