Legal pack retainers and money held in trust
Why a retainer requested through Achekam's Legal pack is the practice's own fee money, and where money a South African practice holds for clients must go.
By Achekam · · 4 min read · For Legal businesses in South Africa
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"Please pay a retainer before we start." Few sentences cause more confusion in a small South African law practice. To the client, it is a payment to the attorney. To the bookkeeper, it may be income. To the Legal Practice Act, it may be money held on the client's behalf, which belongs in the trust account and nowhere else. Which of those it is decides where the money must go on the day it arrives.
Achekam's Legal pack can request a retainer from a client. This piece explains exactly what that request is, why it is not trust money, and where a practice must keep the money it holds for clients instead.
What the pack's retainer request is
The Legal pack keeps no trust account. A retainer it requests is the practice's own money for fees, and money held in trust stays outside the add-on altogether.
The pack's starter catalogue lists consultations, professional fees, fixed-fee matters, retainers and disbursements recovered, without prices, posting to Legal fees (4310) and Disbursements recovered (4320). A retainer billed from the catalogue is therefore an invoice for fees, and it reaches the business books like any other invoice: created as a draft that can be changed or deleted, then issued with the next number in the sequence and posted to the ledger as debtors, sales and output VAT. Default terms are 30 days.
That design is deliberate. The business books record the practice's own income and costs. They are not a trust ledger, and nothing in the pack pretends to be one.
Money held for a client goes into trust as soon as possible
Section 86(2) of the Legal Practice Act requires every trust account practice to keep its trust account at a bank with which the Fund has an arrangement under section 63(1)(g), and to deposit money held on behalf of any person into it as soon as possible after receipt. The Legal Practitioners Fidelity Fund says the same: every legal practitioner referred to in section 84(1) must operate a trust account at a bank that has an arrangement with the Fund, and deposit money held for others as soon as possible after receipt.
The test is whose money it is. Money paid towards transfer costs, a settlement amount, or a deposit on fees for work not yet done is held on the client's behalf. It goes into trust, through the practice's trust accounting system, not into the business account and not through an invoice in the business books.
Unearned money is not yet the practice's
Investopedia explains that an unearned retainer is held in a retainer account before services are provided and does not belong to the professional until work begins, while the earned portion accrues as work is done, by hours worked or by tasks or milestones. It adds that retainer fees usually remain separate from the professional's hourly earnings, which ensures the money is not used for personal purposes before the services are fully performed.
For a South African practice, the safe reading is plain. If a client pays in advance for work the practice has not yet done, that money is held on the client's behalf and belongs in trust until a fee is earned and billed. Use the pack's retainer request only where the practice is billing for its own fees: for example, an agreed fixed fee for work already done, or fees earned to date. When in doubt about a particular arrangement, ask your trust account auditor before the request goes out, not after the money arrives.
No client money without a valid Fidelity Fund certificate
The Legal Practice Council says a legal practitioner who needs a Fidelity Fund Certificate, and anyone they employ or supervise, may not receive or hold money or property belonging to anyone unless the practitioner holds a valid certificate.
That rule sits above any software. A practice whose certificate has lapsed must not take client money at all, through the trust account or otherwise. A receptionist accepting a deposit "for the attorney" is caught by the same rule, because the prohibition extends to the people the practitioner employs or supervises.
Where retainers and recovered disbursements post
Because the catalogue keeps fees and recovered disbursements in separate accounts, the income statement shows how much of the practice's income was its own work and how much was costs passed on. A billed retainer for fees lands in Legal fees (4310). Disbursements the practice paid from its own business account and recovers from the client land in Disbursements recovered (4320).
When a fee is later earned against money that was properly held in trust, the transfer from trust is recorded in the business books as a receipt against the fee note. Recording fees moved from trust to the business account sets out that step, and from fee estimate to ledger explains how an accepted estimate becomes an invoice.
Review the mandate wording first
The pack's mandate and fee agreement is starter wording that a practitioner reviews before use. Before the first retainer request goes out, read the wording against your own practice:
- Does it describe the retainer as payment for fees, and say when fees are earned?
- Does it explain that money held for the client goes into the trust account?
- Does it match your fee structure, whether hourly, fixed or staged?
- Has a practitioner approved it, with the date recorded?
Opening a new matter with FICA and a mandate covers the rest of the intake. The text of section 86 of the Legal Practice Act on Acts Online sets out the duty to keep client money in a trust account and when it may be invested.
Decide, in writing, which payments your practice will request through the pack and which will always go to trust. Tell every person who speaks to clients about money, and the confusion over "retainer" ends there.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
