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Open & Manage IOLTA Accounts
The Supreme Court of Texas has amended the IOLTA rules requiring Texas attorneys
to place IOLTA accounts at eligible financial institutions. If your financial institution
currently holds IOLTA accounts, and you would like to learn more about becoming
eligible, visit the Become Eligible section for
more information.
If your institution does not currently hold IOLTA accounts, please contact
Janice Cappiello at 512.320.0099, ext. 108, before opening IOLTA accounts.
You must acquire a bank code and a packet of instructions and forms from the Foundation
before qualifying for the eligibility process.
If your institution has been certified as eligible and it is determined that an
attorney or law firm must maintain an IOLTA account, the following steps should
be taken to open the account:
- The IOLTA account should be established in the name of the attorney or law firm
and be an interest-bearing trust account, such as a negotiable order of withdrawal
(NOW) account, with the interest earned paid to the Texas Access to Justice Foundation,
a 501(c)(3) nonprofit corporation. An incorporated law firm is permitted to use
an interest-bearing checking account (NOW account) as an IOLTA account.
- The tax identification number for all IOLTA accounts is that of the Foundation.
The Foundation is a tax exempt, nonprofit Texas corporation. All IOLTA accounts
are exempt from backup withholding because of the Foundation’s status as a
tax-exempt entity.
The tax identification number will not match the name on the account. Submit a substitute
W9 form to the Foundation for verification of the tax identification number. The
bank is not required to report to the IRS the interest earned on the IOLTA account
on behalf of the attorney or law firm.
- All IOLTA accounts should have the same closing date (or statement cycle) at the
end of the month.
- The IOLTA Notice to Financial
Institution form should be completed by the bank and attorney and returned to
the Texas Access to Justice Foundation via fax at 512.469.0112, or mail to P.O.
Box 12886, Austin, Texas 78711-2886. Banks should provide this form to all branches
to accommodate attorneys and law firms in establishing IOLTA accounts.
For more information on how to open an IOLTA account, please contact
Janice Cappiello at 512.320.0099, ext. 108.
Service Charges
Allowable reasonable fees are the only fees and service charges that may be deducted
by an eligible institution from interest earned on an IOLTA account. Allowable reasonable
fees may be deducted from interest or dividends on an IOLTA account only at the
rates and in accordance with the customary practices of the eligible institution
for non-IOLTA customers. No fees or service charges other than allowable reasonable
fees may be assessed against the accrued interest or dividends on an IOLTA account.
Any fees and service charges other than allowable reasonable fees shall be the sole
responsibility of, and may only be charged to, the attorney or law firm maintaining
the 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:
http://www.fdic.gov/deposit/deposits/changes.html
Closing IOLTA Accounts
An IOLTA account should only be closed when the attorney or law firm officially
closes the account. Once an account is designated as “closed” on the
IOLTA Remittance Report, it should not be listed on future reports.
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