TAJF-Open / Manage IOLTA Accounts

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 Rick Ybarra, Banking Programs Manager, at 512.320.0099, ext. 106.

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
FDIC regulations stipulate that funds which are deposited into an attorney’s or law firm’s trust account belong to the individual clients represented and will be insured up to the $100,000 aggregate per client, regardless of the total dollars in the account and regardless of the attorney’s or law firm’s other deposits in that institution.

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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