IOLTA Program Guidelines for Financial Institutions

Benefits

Participation in the IOLTA program by financial institutions is not mandatory, but can result in many significant benefits.  Conversely, not offering IOLTA accounts may negatively impact relationships with attorneys seeking a full services institution.

The following are some specific benefits associated with participating in the IOLTA program:

• Publicity
  • Financial institution participation in the IOLTA program is publicized by the Idaho Law Foundation through attorneys, the Idaho State Bar and its monthly publication, The Advocate, the media, and nationally to other state programs.  Also, financial institutions with the most favorable IOLTA accounts policies (waived service charges, competitive interest rates) are highlighted whenever possible and may, as a result receive significant referral business.
• Public Relations
  • Your IOLTA participation may also be described in your banking information brochures, newsletters, annual reports, and other publications to let shareholders, customers, and others know that your institution is a partner in raising funds for public service programs in the state of Idaho.
• Good Business
  • Promoting IOLTA is good business for your institution.  Since an IOLTA account is a pooled client funds account, average balances can often run significantly higher than similar type deposit accounts, and as a class, offer great potential for low-cost deposits.  Further, attorneys are an excellent source for cross selling banking services, such as consumer and business loans, other deposit accounts, mortgage services, and escrow and trust services.
• Community Reinvestment Act
  • Many institutions have cited their IOLTA participation within their Community Reinvestment Act statements to state and federal regulatory agencies.  The Idaho Law Foundation can provide grant information in your service area to facilitate this process.

For all these reasons, and for the charitable purpose for which IOLTA funds are used, IOLTA can be a very positive undertaking for financial institutions.  The following are specific guidelines to assist you in complying with provision of IOLTA.

IOLTA Accounts

A lawyer or law firm will open a trust account at a financial institution and at the same time should provide an Idaho State Bar Trust Account Certification (Exhibit E) to the institution.  The lawyer is to obtain this form from the Idaho State Bar.  On this certification the lawyer will indicate whether the trust account is to be an IOLTA account or a non-IOLTA account (an account for a specific client or the lawyer elects to not participate in IOLTA).

The attorney’s signature on the Certification authorizes the financial institution to report any overdrafts to the Idaho State Bar and also designates the account to be an interest bearing IOLTA account.

The financial institution should open the account with the following specifications:

• Title of Account: “Idaho Law Foundation, Inc.” should appear in the title of the account, along with the attorney or firm name and address.  “Idaho Law Foundation” should not appear on checks or deposit slips.
• Tax Identification Number on IOLTA Accounts:  The TIN of the Idaho Law Foundation is 23-7439392 and should be used to assign all interest income on IOLTA accounts.  The TIN of the lawyer, law firm, or client should be used on non-IOLTA accounts.  A completed W-9 is included in this package (Exhibit F) for IOLTA accounts to certify the TIN of the Idaho Law Foundation and to certify that the Idaho Law Foundation is NOT subject to backup withholding.
• Forms 1099: Neither the IRS nor the Idaho Law Foundation require that a 1099 be generated on IOLTA accounts.  If a 1099 is generated on IOLTA accounts, it should reflect the TIN of the Idaho Law Foundation.  The Idaho Law Foundation must be listed as the owner of the TIN for all reports of interest to the IRS.
• Account Type:  Many institutions have found that by assigning a specific account type to all attorney trust accounts and a further designation to IOLTA accounts they can avoid potential problems with the unique requirements of reporting overdrafts and IOLTA.  Branch personnel should be informed of special procedures used when opening IOLTA accounts.
• Service Charges and Fees:  A financial institution may be reimbursed for the reasonable costs of administering an IOLTA account, computed in accordance with the institution’s customary pricing procedures for interest-bearing transaction accounts.  Cashier’s checks, wire transfers, check printing and overdraft costs are to be billed directly to the attorney in a manner agreed upon by the attorney and the financial institution.  These fees are not to be deducted from the interest earnings for IOLTA.

As part of the annual licensing process, attorneys are required to sign a Trust Account Certification each year and return it to the Idaho State Bar.  These forms will be forwarded to those financial institutions designated on the Certification to verify that those accounts are operational and are properly designated by the financial institution as IOLTA or non-IOLTA accounts.

• Account Closing:  It is important for financial institutions to notify the Idaho Law Foundation when a lawyer’s trust account closes.  Because we compare account information received from attorneys to information received from banks, you can avoid time consuming research and correspondence by notifying the Idaho State Bar promptly upon a lawyer’s trust account’s closing.  A form for this purpose is provided (Exhibit G), or you can note it on the IOLTA remittance report.

Remitting IOLTA Income

To insure proper remittance, the financial institution should adhere to the following interest transmittal and reporting provisions:

• Reporting Period:  The financial institution must remit all net interest earned on each IOLTA account maintained at that institution on either a monthly or a quarterly basis to the Idaho Law Foundation.  Since most institutions pay interest on a monthly basis, those institutions that choose to remit on a quarterly basis should insure that interest paid during the first two months of the quarter either remains in the IOLTA account and continues to earn interest or is credited to another interest bearing master account which pays a rate of interest equal to or greater than the IOLTA account.
• Interest Remittance Reports:  Each payment of interest to the Idaho Law Foundation must be accompanied by the following information:

1. Name and address of institution.
2. Name and number of attorney account.
3. Average daily balance.
4. Balance at close of reported period.
5. Dates of reporting period.
6. Interest earned.
7. Service charges, if any
8. Net interest paid.
9. Interest rate for reporting period.

A financial institution may utilize its own internal reporting mechanisms to generate the above information or it may use the Interest Remittance Report Form (Exhibit H).  Information regarding all IOLTA accounts maintained at the institution should be included, regardless of whether the account earned interest in the current period or not.

• Calculation of Interest Net of Charges to IOLTA: All account normal service charges and fees are to be charges against IOLTA interest earned.  In no circumstance shall the account principal be disturbed nor the attorney charged or billed for service charges.  Service charges may be waived or deducted on an individual basis with charges deducted from the interest earned on that account, or by netting the total of service charges assessed against the total of interest paid on the group of accounts remitted for and reported upon in the same period.
• Payment Options:  Financial institutions may choose to remit payment by:
  • Check made payable to the Idaho Law Foundation.
  • Transfer of earned interest into an Idaho Law Foundation master account at the financial institution.  (Please contact the Idaho Law Foundation if you wish to remit in this manner.)
• Report to Attorney: The financial institution shall provide the depositing attorney with reports as agreed between the attorney and the financial institution.

Automatic Reporting of Trust Account Overdrafts (ARTAO)

In addition to the IOLTA program, 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. This requirement applies to all trust accounts regardless if it is an IOLTA account or not. Such notification can be made by a computer-generated duplicate notice, a photocopy of the notice sent to the attorney, or a report containing all the relevant information about such overdrafts.

Conclusion

These guidelines are just that – guidelines. If your institution wishes to modify or change any of the procedures described in this information, please contact the Idaho Law Foundation and discuss your individual concerns. We strive to be accommodating to institutions offering this service and are receptive to any reasonable modifications and changes which do not jeopardize the intent of the IOLTA program.

Participation in the IOLTA program provides your financial institution, as a community-oriented institution, with the ability to work with the legal profession in a partnership providing an important and necessary public service for the people of Idaho.