Attorneys, Banks, And Financial Management – The IOLTA Account

Attorneys, Banks, And Financial Management – The IOLTA Account

Attorneys, Banks, And Financial Management – The IOLTA Account

Because lawyers often handle their clients’ money, settlement checks, or advance payments for court costs or other expenses, they must participate in the Interest on Lawyers’ Trust Accounts (IOLTA) program. This is true in the State of California as well as most other jurisdictions in the United States. Any attorney who handles client funds that are too small in amount or held too briefly to earn interest for the client must use an IOLTA account for such funds.

A lawyer who receives funds that belong to a client must place these funds in a trust account separate from the lawyer’s personal funds. Lawyers deposit client monies in an IOLTA account when the funds cannot otherwise earn enough income for the client greater than the cost of securing such income. The client receives the interest if the funds are sufficiently large or will be held long enough to generate net interest that is sufficient to be reallocated back to the client.

Every state, including the District of Columbia and the Virgin Islands, operates an IOLTA program. In 2009, the U.S. IOLTA programs generated more than $ 124.7 million nationwide. Some state IOLTA programs are voluntary (attorneys have a choice to participate or to opt-out of participating), and other state IOLTA programs are mandatory, requiring attorney participation. Over 5,500 financial institutions participate in IOLTA by maintaining IOLTA accounts.

Interest from lawyer trust accounts is pooled to provide civil legal aid to impoverished individuals while also providing funding to support the betterment of the judicial system. These funds, along with public funding at both the state and federal levels, as well as private funding, enable nonprofit legal aid providers to assist low-income individuals with civil legal matters such as landlord/tenant issues, child custody disputes, and advocacy for the disabled.

Thus, IOLTA accounts provide an innovative and unique mechanism to increase access to justice for people living in poverty, thus improving the American justice system without taxing the public and at no cost to lawyers or their clients. The interest earned from pooled IOLTA accounts benefits nearly 100 nonprofit legal service organizations throughout California.

Attorneys must be prepared to satisfy clients regardless of the nature of the services provided. The CDTA provides the training that attorney-advocates require to meet the needs of clients in the 21st Century. At CDTA, we train, educate, and develop students to be exceptional attorneys and trial advocates. Call us today at (760) 342-0900 or find out more online here.