Frequently Asked Questions
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Through the IOLTA (Interest on Lawyers Trust Accounts) program, the Idaho Law Foundation works with members of the Idaho State Bar and the Idaho banking community to allow attorneys to place client funds which are nominal in amount or held for a short period of time into pooled interest-bearing accounts.
Interest earned is remitted to the Idaho Law Foundation who distributes these funds through the IOLTA grant process to programs that meet our funding requirements, including programs that:
- Provide legal aid to the poor
- Support law related education programs for the public
- Offer scholarships and student loans
- Improve the administration of justice
Yes. The first IOLTA program in the U.S. was introduced in Florida in 1981. All fifty states and a number of Canadian jurisdictions now have IOLTA programs. These programs have proven very successful.
The IOLTA program gathers the small amounts of interest earned on general client trust accounts. This interest does not belong to the attorneys or the banks and is not in sufficient amounts to allocate to individual clients.
Other trust accounts (non-IOLTA) are established when interest on a client’s trust deposit could be made available for the client’s benefit, generally for client deposits that are larger in amount or longer-term in maturity.
Pursuant to the Idaho Rules of Professional Conduct Section XIII every general attorney trust account will be converted to an interest-bearing account with the interest paid by the financial institution to the Idaho Law Foundation unless the lawyer or law firm files a Notice of Declination indicating his/her or their decision to "opt out." This Notice must be filed with the Executive Director of the Idaho State Bar by February 1 of each year.
The Trust Account Certification, which is a part of the annual licensing procedure, authorizes the financial institution holding your general trust account to convert it to an IOLTA account.
The Idaho Bar Commission Rule 302 and Idaho Rule of Professional Conduct 1.15 govern a lawyer’s handling of monies and/or properties for the lawyer’s clients. These rules have been adopted by order of the Idaho Supreme Court and must be adhered to in order to practice law in the state of Idaho.
No. The program was not meant to utilize money from all clients trust deposits - only those nominal in amount or to be held for short periods of time. Clients' funds that are substantial in amount or to be held for a long period of time are to be placed in a separate trust account solely for that specific client.
No. IOLTA imposes no administrative burden on participating attorneys or law firms. A participating attorney or firm places nominal or short-term deposits into a single unsegregated account. This unsegregated account bears interest, but this should not affect how an attorney or law firm handles client's trust deposits.
There are none to the client or the attorney. The Idaho Law Foundation receives the interest from participating trust accounts and is exempt from federal income tax.
Any financial institution that wishes to be approved to maintain client trust accounts must agree to automatically notify the Idaho State Bar of any instrument presented on an attorney’s trust account that would result in an overdraft, even if the bank does not actually return the check.
Participating financial institutions - not attorneys - are responsible for transmitting interest income to the Idaho Law Foundation. The court's enabling opinion provides that the Foundation will absorb any financial institution's special charges or fees for its involvement in IOLTA, by directing that interest payments be net of such charges and fees.
Most financial institutions in Idaho are presently participating in the program. Click here for the List of Participating Financial Institutions. If a financial institution needs additional information about the program, please contact Debbie Dudley.
To honor banks that commit to offering favorable interest rates on IOLTA accounts, even in uncertain financial times, the Idaho Law Foundation created the Leadership Bank program. Leadership Banks agree to:
- Pay an interest rate of at least 70% of the Federal Funds rate, based on net yield of all accounts held;
- Waive all service fees and charges on IOLTA accounts; and
- Meet basic IOLTA reporting requirements.
IOLTA will only consider funding requests from organizations that meet at least one of the following funding criteria areas:
- To provide legal aid to the poor;
- To provide law-related education programs for the public;
- To provide scholarships and student loans;
- To improve the administration of justice; or
- For such other programs for the benefit of the public as are specifically approved from time to time by the Supreme Court of Idaho.
The Idaho Law Foundation usually accepts applications between mid July and mid September each year. Our website will announce any requests for proposals. Completed applications must be submitted to Idaho Law Foundation by the published deadline. During the application period downloadable grant applications are available on the Idaho Law Foundation website. If your organization would like to receive notice of the next available grant application cycle, please send complete business contact information to Lindsey Peterson.
Grants are funded for a calendar year, from January 1 to December 31.
Grants are reviewed by the IOLTA Grant Committee who makes funding recommendations to the Idaho Law Foundation Board of Directors.
If a grant recipient has not used all grant funds by the end of the grant year, the grant recipient must take one of the following actions no later than 60 days after the end of the grant year:
- Submit a written request to the Idaho Law Foundation for an extension of time to spend the remaining grant funds. This request must include the reason why funds were not spent in the grant year and an outline of how and when funds will be spent.
- Return the unspent funds to the Idaho Law Foundation.
Information concerning reporting requirements is outlined in paragraph 5(b) of the IOLTA contract. The report includes the following information:
- Name of program;
- A detailed financial report on expenditure of IOLTA funds;
- A financial report of your organization showing the relationship of IOLTA funds to overall funding of the project;
- A narrative report indicating what was accomplished by the expenditure of IOLTA funds and the progress made toward the purpose for which said funds were granted; and
- Signature and verification of responsible person.
Failure to file the required report within 60 days of the end of the grant period will be grounds to terminate disbursement of any future grant funds and to request return of any funds not properly accounted for.
The new IOLTA rules address both fairness and need in a way that will help the IOLTA grant program increase its funding for essential and underfunded Idaho programs that provide legal services to the poor and law related education to the public.
IOLTA accounts were originally set up as interest-bearing checking accounts, regardless of the balance on the account. Over time, banks have created different types of products that have the features necessary for trust checking accounts, but pay higher rates of interest than are paid on interest bearing checking accounts. Yet, many banks kept IOLTA accounts in lower paying checking accounts, even when they met the requirements for higher paying accounts. The rate comparability rule simply asks banks to treat IOLTA accounts like similarly situated non-IOLTA accounts.
The new IOLTA rules eliminate the old opt-out rule, institute rate comparability, and institutionalize IOLTA reporting requirements. These new rules are included in the Idaho Bar Commission Rules, Section XIII, Trust Accounts, Rules 1302 to 1306 and 1309.
Rate comparability helps optimize income received for IOLTA grants. It requires attorneys and law firms to place their IOLTA accounts at financial institutions that agree to pay the highest interest rate generally available at those institutions for other customers when IOLTA accounts meet the same minimum balance or other account qualifications, if any. To date, more than 30 states have adopted rate comparability for their IOLTA programs.
The new IOLTA rule limits the reasons an attorney or law firm may opt-out. Attorneys or law firms may request an exemption by submitting a letter to the Idaho State Bar that provides evidence that compliance with IOLTA rules would create an undue hardship on the lawyer or law firm and would be extremely impractical, based on geographic distance between the lawyer or law firm's principal office and the closest financial institution participating in the IOLTA program.
The new IOLTA rules were voted on by members of the Bar during the 2011 resolution process. The rules passed with 87% of the vote and were approved by the Idaho Supreme Court, effective July 1, 2012.
The Idaho State Bar maintains a list of Approved Financial Institutions. The Idaho Law Foundation is still working to collect participation agreements from Idaho's financial institutions.
If your bank is not on the list, we suggest you contact your bank and encourage them to submit their signed IOLTA agreement so we can continue to partner with them.
Most attorneys and law firms will not even know that a change has occurred. The experience in the 30-plus states that have already adopted comprehensive IOLTA supports that conclusion. However, there are three instances when it may be possible that an attorney or law firm may have to make some changes.
- Attorneys or law firms who have previously chosen to opt-out of IOLTA may need to open an IOLTA account at one of the approved financial institutions.
- If an attorney or law firm has an IOLTA account at a financial institution that chooses to no longer participate in IOLTA, the attorney or law firm will need to move IOLTA accounts to a participating financial institution
- If an approved financial institution choses to set up a new account type to meet the IOLTA requirement, then attorneys or law firms may be asked to sign new IOLTA account agreements.
The rule only requires that financial institutions pay the highest interest rate or dividend paid on similarly situated non-IOLTA accounts at their own financial institution.
The Idaho Law Foundation will work with each of Idaho's participating financial institutions to assist with implementation and ensure compliance.