Trust Accounts

An IOLTA account is an interest-bearing checking account that an attorney or law firm maintains for client funds nominal in amount or held for a short period of time. The account is a demand account established in the name of the attorney or law firm. The account is often referred to as a client trust account.

In the Rules Governing the Operation of the Texas Access to Justice Foundation, Rule 4 states:

Deposit of Certain Client Funds.

An attorney licensed by the Supreme Court of Texas, receiving in the course of the practice of law in this state, client funds that are nominal in amount or are reasonably anticipated to be held for a short period of time, must establish and maintain a separate interest or dividend-bearing insured depository trust account at an eligible institution and deposit such funds in the account. “Interest or dividend-bearing insured depository trust account” means a federally insured checking account or investment product, including a daily financial institution repurchase agreement or a money market fund at an eligible institution as defined in Rule (7). A daily financial institution repurchase agreement must be fully collateralized by, and an open-end money market fund must consist solely of United States Government Securities. A daily financial institution repurchase agreement may be established only with an eligible institution that is deemed to be “well capitalized” or “adequately capitalized” as defined by applicable federal statutes and regulations. An open-end money market fund must hold itself out as a money market fund as defined by applicable federal statutes and regulations under the Investment Company Act of 1940 and have total assets of at least $250,000,000.

The funds covered by this rule shall be subject to withdrawal upon request and without delay. All IOLTA-eligible client funds may be deposited in a single unsegregated account. Attorneys who practice in a law firm or for a professional corporation may utilize the interest-bearing trust account of such firm or corporation to comply with Rule 4. No funds belonging to the attorney or law firm, except funds reasonably sufficient to pay for fees or obtain a waiver of fees or to keep the account open, may be deposited in such an account. The interest earned on the account shall be paid in accordance with and used for the purposes set forth in these Rules. The Foundation shall hold the entire beneficial interest in the interest earned. Funds to be deposited under these Rules shall not include those funds evidenced by a financial institution instrument, such as a draft, until the instrument is fully credited to the financial institution in which the account is maintained. The term "draft" as herein used is defined in Section 3.104 (b) (1) of the Texas Business and Commerce Code. A draft or similar instrument need not be treated as a collected item unless it is the type of instrument which the financial institution generally treats as a collected item. Nothing in this or any other of these Rules prohibits the deposit of client funds into a general account or changes the legal relationship between depositor and financial institution from that established by contract or by applicable state and federal law.

There are many factors that should be considered in determining whether an attorney needs an IOLTA account. For more information, visit the Do You Need an IOLTA Account section.

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 an Eligible Financial Institution section for more information.

If your institution does not currently hold IOLTA accounts, please contact Payal Vora 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.

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