Info for Lawyers

What is an IOLTA account?

An IOLTA account is a commingled client trust account that pays interest to an IOLTA program. Funds are used primarily to support organizations that provide free legal aid to the poor in civil cases. All client trust accounts not set up to earn interest for an individual client must be IOLTA accounts.

Do other states have mandatory IOLTA programs?
Thirty-four other states have mandatory IOLTA programs.

Must real estate closing accounts be IOLTA accounts?
Yes. All client funds that are not placed in an account for the benefit of an individual client must be placed in an IOLTA account.

What if I do not have a commingled non interest-bearing client trust account?
You are exempt from the provisions of this rule. You will simply signify this each year during the annual certification period, which is September 1 — October 31.

May I open an IOLTA account at any financial instutiton?
No. The rule requires attorneys and law firms to maintain their IOLTA account only at eligible banks, savings & loan associations or investment companies which comply with the interest or dividend requirement of the rule.

The rule defines institutions eligible to hold IOLTA accounts as only those institutions which pay IOLTA account customers the highest interest rate or dividend generally available at their own institution to similarly situated non-IOLTA customers.

Are attorneys and law firms responsible for monitoring their institution’s compliance with the interest or dividend requirement of the rule?
No. The foundation is.

Who pays service charges and fees on IOLTA accounts?
The IOLTA rule defines Reasonable Allowable Fees that may be charged against the interest earned on IOLTA accounts. Allowable fees are (1) per check charges, (2) per deposit charges, (3) a fee in lieu of minimum balance, (4) Federal deposit insurance fees, (5) sweep fees and (6) a reasonable IOLTA account administrative fee.

Check printing charges, wire transfer fees, bank checks or certified checks, cash management fees, and overdraft costs are not considered normal service charges and are not paid by IOLTA. Each account holder should make arrangements with the financial institution regarding these costs.

How does the Alabama Law Foundation use the interest?
Since the first grants of IOLTA funds were awarded in 1989, the Alabama Law Foundation has awarded over $17 million for charitable, law related purposes. The existence of IOLTA has allowed us to make progress in meeting the needs of the poor for civil legal aid through funding of pro bono projects and Legal Services. The foundation has also funded projects to improve the administration of justice and to provide law related education for the public.

80% of IOLTA funds go to groups that provide legal assistance to the poor in civil cases. Alabama ranks 51st in the country in civil legal aid funding per poor person. This places our state behind even Puerto Rico.

Alabama Law Foundation, Inc | Post Office Box 4129 | Montgomery, Alabama 36103 | tel 334 387 1600