In 1981, the ABA formed the Advisory Board and Task Force on Interest on Lawyer Trust Accounts, which reported to the ABA Board of Governors in 1982. Beginning in 1978, it provided information on the development of American and foreign IOLTA programs to interested bar associations, legal services providers and states. The ABA has supported IOLTA for 30 years. The ABA Commission on IOLTA monitors developments in areas that may affect IOLTA operations such as banking, grantmaking, tax law and constitutional law. The ABA Commission on IOLTA, consisting of nine members: (1) collects, maintains, analyzes and disseminates information on programs involving the use of interest on lawyers' trust accounts for the support of law-related public service activities (2) makes recommendations for ABA policy on the creation and operation of IOLTA programs (3) maintains liaisons with state IOLTA programs and (4) oversees the IOLTA Clearinghouse, which provides information, materials and technical assistance on IOLTA program design and operation. To support the initiation and operation of IOLTA programs, the ABA created the Commission on IOLTA in 1986. IOLTA programs also fund a variety of other activities including alternative dispute resolution programs, young lawyer special public service projects, victim services programs, court-appointed special advocate (CASA) programs, pro se assistance resources, and law school scholarship programs. These include loan repayment assistance programs, state-based legal information websites, and legal assistance hotlines. IOLTA programs have taken a leading role in funding a number of innovative programs that have had a positive impact on the delivery of legal services to those living in poverty. IOLTA is a significant source of funding for programs that provide civil legal services to those living in poverty, with over 90 percent of grants awarded by IOLTA programs (~$168 million in 2020) supporting legal aid offices and pro bono programs. In 2020, IOLTA grants nationwide totaled over $175 million. Since 1981, IOLTA has generated over $4 billion in revenue throughout the United States. Banking regulations hold that attorneys can set up the accounts as NOW accounts even though the attorney-depositor may be a for-profit corporation, because the interest goes to a not-for-profit charitable entity. Most banks treat IOLTA accounts as Negotiable Order of Withdrawal ("NOW") or other Business Interest Checking accounts. Banks in turn forward the interest earned on these accounts to the state IOLTA program, which uses the money to fund a variety of charitable causes.Īlthough IOLTA creates income, nothing else is changed: lawyers satisfy their ethical and fiduciary duty to place client funds in a secure account there is on-demand access to the client's money and, as in the past, the client realizes no interest income because the nominal or short-term client funds that are pooled in IOLTA accounts are funds that cannot earn net interest for the client. Since the inception of IOLTA, however, attorneys who handle nominal or short-term client funds that cannot earn net income for the client place these funds in a single, pooled, interest-bearing trust account. In addition, these trust funds earned no interest because it is unethical for attorneys to derive any financial benefit from funds that belong to their clients. This is because trust accounts typically are checking accounts (to allow easy access to the funds) and, until the early 1980s, checking accounts did not earn interest. Traditionally, lawyers have placed these deposits into combined, or pooled, trust accounts that contained other nominal or short-term client funds.īefore state laws and Supreme Court rules created IOLTA programs, trust funds pooled in this manner earned no interest. Often, however, the amount of money that a lawyer handles for a single client is quite small or held for only a short period of time, and cannot earn interest for the client in excess of the costs incurred to collect that interest. In such cases, lawyers deposit the funds into trust accounts, where the funds can earn interest for the client. Sometimes the amount of money that an attorney handles for a single client is quite large. Lawyers often handle money that belongs to clients, such as settlement checks, fees advanced for services not yet performed, or money to pay various court fees.
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