INFORMATION ON IOLTA

WHAT IS IOLTA?
IOLTA is an acronym for Interest on Lawyers' Trust Accounts. Attorneys routinely receive funds to be held in trust for future use. Funds of a substantial amount or that are to be held for a long period of time are usually placed in an interest-bearing account for the individual client's benefit. If funds are small in amount or to be held for a short period of time, they are usually commingled in a non-interest-bearing checking account. This is done because the interest generated by these funds would not be enough to benefit the individual client.

The IOLTA program, authorized by the Supreme Court of Utah in1983, allows attorneys to hold interest-bearing accounts. The interest from these accounts is remitted at least quarterly to the Utah Bar Foundation, a charitable, tax-exempt entity. Click here to see Utah Supreme Court Opinion In the Matter of INTEREST ON LAWYERS’ TRUST ACCOUNTS, 672 P.2d 406 (UT. 1983).

For general information on client trust accounts or to see Rule 1.15 Safekeeping Property click here.

TO SEE A COPY OF THE AMENDED IOLTA RULE EXECUTED APRIL 1, 2008, PLEASE CLICK HERE.

To see a list of IOLTA Eligible Financial Institutions, please click here.

IS MY IOLTA ACCOUNT FDIC INSURED?
On November 20, 2008, the FDIC issued a ruling that provides unlimited coverage through December 31, 2009 to deposits held in IOLTA accounts. To see a copy of the Executive Summary from the FDIC, please click here http://www.fdic.gov/news/board/08BODmemo3.pdf. The IOLTA accounts are discussed on page 7 of the Memo.

To see a copy of the full FDIC see rule, click here http://www.fdic.gov/news/board/08BODtlgp.pdf. the IOLTA accounts are discussed beginning on page 19.

If you have additional questions on if a particular deposit is FDIC insured, please contact your local banker or Kim Paulding at the Utah Bar Foundation, 801-297-7046.

HOW DOES THE UTAH BAR FOUNDATION USE THE INTEREST?
The interest generated by the IOLTA program is used by the Utah Bar Foundation to make grants in the following categories:

1. To promote legal education and increase the knowledge and awareness of the law in the community.
2. To assist in providing legal services to the disadvantaged.
3. To improve the administration of justice.
4. To serve other worthwhile law-related public purposes.

Since the first grants of IOLTA funds were awarded in 1985, the Utah Bar Foundation has awarded over $5 million for charitable, law related purposes. The existence of IOLTA has allowed us to make progress in meeting the needs of the poor and disabled for civil legal services through funding of projects. The foundation has also funded projects to improve the administration of justice and to provide law-related education for the public.

The IOLTA program, authorized by the Supreme Court of Utah in 1983, allows attorneys to hold interest-bearing accounts. The interest from these accounts is remitted at least quarterly to the Utah Bar Foundation, a charitable, tax-exempt entity.

DO IOLTA PROGRAMS OPERATE SUCCESSFULLY ELSEWHERE?
Yes. Florida established the first IOLTA program in the United States in 1981. Since that time, all 50 states have established successful programs. IOLTA programs also operate successfully in a number of Canadian and British jurisdictions.

ARE THERE LEGAL BARRIERS TO FINANCIAL INSTITUTIONS OFFERING IOLTA ACCOUNTS?
There are no legal barriers but there may be practical problems, mostly in the data processing area, which participating financial institutions can easily overcome. The Utah Bar Foundation is happy to provide assistance in this area with your financial institution.

HOW DO WE BECOME AN IOLTA PARTICIPATING BANK?
Please call Kim Paulding at the Utah Bar Foundation at (801) 297-7046. In order to participate, your bank must be able to follow the reporting and remittance requirements listed in the IOLTA Rule.

HOW OFTEN MUST INTEREST BE PAID?

Interest must be remitted at least quarterly to the Utah Bar Foundation but preferably on a monthly basis. The interest should be calculated on an average monthly balance in the account, or as otherwise computed in accordance with the institution's standard accounting practice.

WHAT ARE THE REPORTING REQUIREMENTS?
Financial institutions must send a report at least quarterly but preferably monthly to the Utah Bar Foundation. These reports must include the name of the attorney/law firm for whom the remittance is sent, the rate of interest applied, the account number, the average account balance for the reporting period (or other amount from which interest or dividends is determined) the amount of any service charges or fees deducted, and the net amount remitted to the Foundation.

MAY ATTORNEYS STILL INVEST MONEY IN BEHALF OF CLIENTS?
Yes. Funds of a substantial amount or that are to be held for long periods of time may continue to be invested in an interest-bearing account for the individual client's benefit. Those accounts must be established specifically for the individual client.

WHAT ARE THE TAX CONSEQUENCES OF PARTICIPATION IN THE PROGRAM?
There are none to the attorney or the client. The Utah Bar Foundation, which receives the interest income, is tax-exempt. The Internal Revenue Service stated in Revenue Ruling 81-209 that the interest earned on nominal and short term client advances, which is paid over to a bar foundation pursuant to a court-established program, is not includable in the gross income of any client.


 

UTAH BAR FOUNDATION - 645 SOUTH 200 EAST SALT LAKE CITY, UTAH 84111
Phone: (801) 297-7046 e-mail: kpaulding@utahbarfoundation.org