Lawyers’ Trust Accounts Board Helping to Secure Equal Access to Justice
Frequently Asked Questions
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The PA IOLTA Board provides assistance to attorneys with questions about establishing an IOLTA account. If your question is not answered in the Frequently Asked Questions below, please contact our staff for assistance at 717-238-2001. If you received a letter from the IOLTA Board in conjunction with the Board’s annual attorney compliance monitoring, please contact our office immediately.
Print the Enrollment Form and complete it with the bank manager of the approved financial institution you have selected. The IOLTA Board encourages attorneys to patronize Platinum Leader Banks, which support the mission of the IOLTA Board by paying a premium yield rate on IOLTA accounts. Email (email@example.com) or fax (717-238-2003) a copy of the completed Enrollment Form, along with a list of all the lawyers who use the IOLTA account in the regular course of their practice, to the IOLTA Board.
If a lawyer does not comply with the requirements outlined in Rule 1.15 of the Pennsylvania Rules of Professional Conduct he or she will be subject to the same disciplinary penalties as any lawyer who does not comply with any of the other requirements for the practice of law in Pennsylvania.
Annually, the IOLTA Board runs a compliance check on the IOLTA accounts reported by each Pennsylvania attorney on his or her annual registration form. If you received a letter from the IOLTA Board, you either listed an account on your attorney registration as an IOLTA account that the bank is not reporting to us; made a numerical error in listing the account number; or you reported an exemption that the Board did not grant. Please call our office or email firstname.lastname@example.org immediately to resolve the issue.
Yes, but exemptions are not automatic. They must be requested and granted by the IOLTA Board. Once granted, exemptions are effective for 3 years after which time the attorney may request another. If an exemption is granted, Qualified Funds must be deposited in a non-income producing Trust Account that complies with the overdraft reporting requirements in Pa. R.D.E. 221. Write to the IOLTA Board if you believe any of the permitted exemptions apply. Exemptions will be granted if:
(i) Low balance account: If the average daily balance of your current IOLTA account, as measured over twelve months, is less than $5,000, you may request an exemption.
(ii) Account service charges routinely exceed income: If the bank service charges assessed on your current IOLTA account routinely exceed the interest earned, you may request an exemption.
(iii) Extreme impracticality or undue hardship: Under limited circumstances it would be unduly burdensome for a lawyer to maintain a Trust Account as an IOLTA Account. An example includes the lack of an Eligible Institution that offers IOLTA Accounts in the lawyer’s geographical location.
(iv) Other compelling and necessitous reasons: There may be compelling and necessitous reasons justifying an exemption from the requirement that the lawyer maintain a Trust Account as an IOLTA Account. A lawyer who demonstrates a compelling and necessitous reason for not complying with IOLTA may request an exemption. A philosophical objection to IOLTA does not constitute a compelling and necessitous reason for an exemption.
Lawyers must place funds that meet the definition of “Qualified Funds” under Pa. R.P.C. 1.15 into a Pennsylvania-designated IOLTA account. Qualified Funds are those funds which are received by a lawyer or their law firm as the result of activities that are regulated as the practice of law in Pennsylvania which are not large enough (or will not be held long enough) to justify the cost of creating a separate interest bearing account solely for the benefit of the client / third party owner that retains an interest in the funds while they are in the possession of the lawyer or law firm. Factors to consider whether funds subject to Pa. R.P.C. 1.15 are Qualified Funds can be found in 204 Pa. Code § 81.104(g). Common examples include refundable retainers, proceeds from legal settlements, funds generated by real estate closings, advanced costs, etc.
A lawyer will not be liable in damages or held to have breached any fiduciary duty or responsibility because monies are deposited in an IOLTA account pursuant to the lawyer’s judgment in good faith that the monies deposited were qualified funds for deposit in an IOLTA account.
The Pennsylvania IOLTA rules and regulations are applicable if you are receiving what would otherwise be Pa. R.P.C. 1.15 Qualified Funds as the result of your practice of law in Pennsylvania (see 204 Pa. Code § 81.103(a)(ii) regarding the obligations of lawyers at law firms with a multi-state practice). If you are receiving such funds you will need to utilize a separate Pennsylvania-designated IOLTA account as financial institutions are not able to accommodate reporting the same IOLTA account to different state IOLTA authorities.
Pennsylvania’s IOLTA rules and regulations do not prohibit the use of electronic transactions in conjunction with your firm’s IOLTA account. However, the same information that would otherwise be recorded for check transactions must also be recorded for any transactions conducted electronically, and must contain the key information needed for the recordkeeping requirements in Pa. R.P.C. 1.15(c).
The IOLTA rules permit attorneys to contract with their financial institution for extra services for their IOLTA account such as fraud prevention safeguards like “Positive Pay” protection for checks and ACH (Automated Clearing House) debit filtering. These safeguards can vary slightly by institution, but generally speaking, Positive Pay is a common term for a service whereby a bank will only honor checks written on an account if the check in question is matched to one on a list previously provided to the bank by their customer so that the bank can verify that the check is authentic by comparing the payee, date, check number, dollar amount, etc. Similarly, ACH debit filtering debit filtering is a common term for a banking service that allows a customer to ensure that only those electric ACH payments that the customer authorized are permitted to post to the customer’s account. In terms of paying for these or similar safeguards, if you have not made arrangements to have fees incurred on your IOLTA account billed to your operating account, Pa. R.P.C. 1.15(h) permits an attorney to place some of their own funds into an IOLTA account solely for the purpose of paying service fees (but only in the amount necessary to do so).
Pennsylvania lawyers are permitted to maintain multiple IOLTA accounts, so if you’d like to close an existing account and move the remaining Qualified Funds to your new IOLTA account, you certainly can do so (provided that you save the required bank statements and related records required by Pa. R.P.C. 1.15(c)). Once an IOLTA account does not hold any funds owed to any client or third party, you may request that the financial institution close the account, and they will report the date of closure electronically to the IOLTA Board. You can also refer to the IOLTA Board’s IOLTA Transfer Toolkit for assistance on changing banks. If you are retiring or closing your firm and still have funds remaining in your IOLTA account, please refer to the IOLTA Board’s forms and instructions on turning over Unclaimed or Unidentifiable IOLTA funds per Pa. R.P.C. 1.15(v).
The IOLTA Board is not authorized to offer legal advice or ethical opinions. For guidance, please read Handling Funds of Others.
Nobody. The Internal Revenue Service (IRS) has ruled that there are no tax consequences to the client, the lawyer or the IOLTA Board. Also, there is no tax reporting requirement for the lawyer, financial institution or client since all IOLTA accounts will use the Tax Identification Number of the IOLTA Board.
The IOLTA Board’s tax ID is: 25-1802119.
Interest earned on IOLTA accounts may be used only for the following purposes:
- delivery of civil legal assistance to the poor and disadvantaged;
- educational legal clinical programs and internships administered by law schools;
- the administration of justice; and
- the administration and development of the IOLTA program.
All disbursements and allocations of IOLTA funds are subject to the prior approval of the Supreme Court of Pennsylvania.