Trust Accounts

Attorneys routinely receive client funds, such as unearned retainers or settlements, which they place in financial institutions. Since the funds are being held for the benefit of the client, attorneys must place these funds in an account separate from their general operating account or any personal account.

Client trust accounts:

1. If the client funds will generate interest income sufficient to offset the expense of investing them in a separate account for the client (large sums of money or funds to be held for a long period of time), the attorney should invest the funds for the client. The same principle applies if the bank offers, and an attorney chooses to utilize, a sub-accounting product that creates separate interest-generating accounts for individual clients that are tied to one master account. The following diagram illustrates this basic concept.

Chart Illustrating funds going into Master Account

2. In 1984, the Supreme Court of Texas set up the Interest on Lawyers’ Trust Accounts (IOLTA) Program to allow attorneys to pool short-term and nominal deposits into one account with the interest paid to the Texas Access to Justice Foundation. As of July 1, 1989, all Texas attorneys who handle qualifying client funds must establish an IOLTA account.

Determine if you need an IOLTA account.

FDIC Protection - Updated Dec. 31, 2010
All funds in IOLTA accounts at Insured Depository Institutions are insured in full under the Federal Deposit Insurance Corporation’s (FDIC) temporary unlimited insurance program which is in effect from December 31, 2010, through December 31, 2012.  All IOLTA accounts at financial institutions that did not opt out of the Transaction Account Guarantee Program (TAGP) also have unlimited insurance for the same period of time.

Unless extended by Congress, after December 31, 2012, unlimited FDIC coverage will not be available on IOLTA or other non-interest bearing accounts.  Starting January 1, 2013, the standard FDIC insurance amount will be $250,000 per depositor.  Because the FDIC considers IOLTA and other lawyer/law firm trust accounts as fiduciary accounts, the per depositor coverage means that funds of individual clients and third persons in a trust account will be fully insured up to the $250,000 maximum, including any funds a client or third person also has on deposit at the same insured depository institution. 

A link to the FDIC web page for more information can be found at:


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