IOLTA

What is IOLTA?

IOLTA stands for Interest on Lawyers' Trust Accounts. It refers to special bank accounts where lawyers hold client funds that are too small in amount or held too briefly to earn interest for the client. The interest earned goes to fund legal aid and other public interest programs. IOLTA accounts are a requirement in most states for lawyers holding any client funds.

IOLTA compliance requirements

Keep client funds completely separate from firm operating funds. Use a bank approved for IOLTA participation in your state. Maintain detailed records showing each client's funds and all transactions. Never commingle personal or firm funds with client money. Reconcile IOLTA accounts at least monthly. Bar associations audit trust account compliance regularly, and violations carry serious consequences including suspension.

Common IOLTA mistakes

Depositing earned fees into IOLTA rather than transferring them out promptly causes problems. Using IOLTA for operating expenses, even temporarily, is commingling. Poor recordkeeping makes it impossible to determine each client's balance. Forgetting to move funds when a matter concludes leaves stale balances. These errors lead to disciplinary complaints. Treat trust accounting as a non-negotiable compliance priority.