IOLTA FACT
SHEET
Most commonly
asked questions
1. What is IOLTA
?
IOLTA, the Interest On
Lawyers' Trust Accounts program, is a
relatively recent addition to the legal
profession, and an even more recent
addition to Indiana. IOLTA allows
attorneys to place nominal or short-term
client trust funds, which are commingled
in an interest earning account. The
interest earned on these funds is
periodically remitted by financial
institutions to a designated
administrative body, which in Indiana is
the Indiana Bar Foundation
2. How
will the money collected under IOLTA be
spent?
A component of the IOLTA
Program is establishment of an approved
pro bono program in each of Indiana's 14
judicial districts. In some areas local
bar associations have established
programs. These may serve as the basis
for that district's plan. Funding from
IOLTA will help develop these pro bono
legal services for the poor. A separate
Pro Bono Commission appointed by the
Supreme Court and the Indiana Bar
Foundation will serve to coordinate the
efforts of the state's pro bono programs.
3. Is
the IOLTA program unique to Indiana?
No, Indiana is the 50th
state to adopt an IOLTA program. Of the
50 operational IOLTA programs, the
programs range from VOLUNTARY (which
gives an attorney a choice to participate),
OPT-OUT to COMPREHENSIVE (mandatory).
Indiana has chosen the OPT-OUT program.
4. What is the Opt-out
IOLTA Program?
The program requires all
lawyers who practice in Indiana and hold
client funds in trust accounts to place
their "pooled" nominal and/or
short term non-interest bearing client
trust accounts into interest-bearing
IOLTA accounts. Those lawyers or law
firms who do not "opt-out" of
the program by October 1 of each year
must enroll in the program.
5. Does the Opt-out
IOLTA program exist today?
Yes. Of the 50 IOLTA
Programs in the United States: 21 states
have Opt-out Programs. Three states have
Voluntary Programs, and 26 states have
Mandatory Programs. Indiana is the 22nd
state to have the Opt-out Program.
6. What must lawyers
do to comply with the IOLTA Program? Be
specific.
Only one form is needed
to complete registration: The Notice
to Financial Institution Form.
Provisions are made for
either the opening of a new IOLTA Account
or for the conversion of an existing
trust account to an IOLTA Account. All
IOLTA Accounts must be interest bearing
negotiable order of withdrawal ("NOW")
accounts or comparable demand deposit
accounts.
7. What if I do not
have a commingled non-interest-bearing
client account?
Lawyers who are not
required to hold client funds in a
commingled non-interest-bearing client
trust account are exempt from the
provisions of this Rule. There will be an
area on the Registration form which will
allow lawyers to indicate this exemption.
8. How will the Opt-out
IOLTA Program affect current trust fund
practices?
This program will impose
no new burdens upon lawyers. Lawyers have
always exercised their discretion in
determining whether a client's trust
deposit was of sufficient size or
duration to justify placement in a
separate interest-bearing account, with
the interest payable to the client.
Lawyers will retain this discretion and
continue to make these fiduciary
decisions under the IOLTA Program.
9. May lawyers still
deposit individual client funds into
accounts which pay interest that can be
passed on to the client?
Yes. Lawyers are expected
and encouraged to continue the customary
practice of establishing separate,
interest-bearing accounts for individual
client's funds when the sum is large
enough or the duration is long enough to
justify the cost of opening,
administering, and closing the account.
Any interest accrued becomes the property
of the client. If clients request their
money be placed in a separate trust
account, the lawyer is ethically bound to
fulfill the clients' request. If a lawyer
thinks the client's funds will earn $50
in interest during the time the funds are
in the trust account, then those funds
are not suitable for an IOLTA account.
10. Will there be a
lot of lawyer time and money involved in
participating in IOLTA?
No time and no money. The
mechanics of initially converting to an
IOLTA account are simple. Yearly, a
Registration form will be mailed out to
all active Indiana lawyers to indicate
their continuing participation.
The registration form
will be part of the annual registration
process with the disciplinary commission.
11. What about the
recent United States Supreme Court
decision on IOLTA?
On April 21, 1999, the
Indiana Supreme Court directed the
President of the Indiana Bar Foundation
to implement Rule 1.15 fo the Rules of
Professional Conduct, better known as the
Interest on Lawyer Trust Accounts (IOLTA)
program. The Supreme Court had reviewed
the report of the IOLTA Technical
Committee regarding the impact of the
United States Supreme Court decision in
the Phillips on Indiana's IOLTA
program. The Court "agreed with the
committee's assessment that any further
delay in implementing the Indiana IOLTA
program 'is not a good solution.'"
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