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Info for Lawyers

1) What is the Interest of Lawyers Trust Accounts (IOLTA) Program?
2) How does the Oregon Law Foundation use the interest?
3) Have IOLTA Programs operated successfully elsewhere?
4) How do I determine whether client funds
     should be placed in an IOLTA account?

5) What are the tax consequences of participation in the program?
6) How does IOLTA affect my clients?
7) What about bank service charges?
8) How do I open an IOLTA account and what are the reporting
     requirements?

9) How do I select a bank?
10) How can I find out more about IOLTA?

1) What is the Interest of Lawyers Trust Accounts (IOLTA) Program?
The Interest on Lawyers' Trust Accounts (IOLTA) program is an innovative way to supply a public good. Client funds that are too small in amount or held for too short of a time to earn interest for the client, net of bank charges or administrative fees, are placed in a pooled interest-bearing trust account. The interest from these accounts is remitted at least quarterly by the financial institutions to the Oregon Law Foundation, a charitable, tax-exempt entity. If a client's deposit is large enough or held for a long enough time to earn interest for the client net of banking charges and administrative fees, the funds may not be placed in an IOLTA account.
The Oregon IOLTA program is mandatory for all lawyers and became so in 1988 when the Oregon State Bar members voted to make the IOLTA program mandatory. The Oregon Supreme Court approved the necessary rule changes, effective May 1, 1989.
For the Oregon Rule of Professional Conduct (Oregon RPC) on client trust accounts including IOLTA accounts please see Oregon RPC 1.15-1 and 1.15-2.

2) How does the Oregon Law Foundation use the interest?
The interest generated by the IOLTA program is used by the Oregon Law Foundation to make grants in the following categories:
A. to support access to justice in Oregon by obtaining and distributing funds to provide legal services to persons of lesser means

B. promote diversity in the legal profession;

C. educate the public about the law.
Since the IOLTA program became mandatory in 1989, the Oregon Law Foundation has awarded over $28,000,000 for charitable, law related purposes. The existence of IOLTA has allowed us to fund programs that provide civil legal services to people of lesser means helping to create greater access to justice in Oregon. The Oregon Law Foundation has also funded projects to promote diversity in the legal profession and to provide law-related education for the public.

3) Have IOLTA Programs operated successfully elsewhere?
Yes. The first IOLTA program in the U.S. was introduced in Florida in 1981. All fifty states now have IOLTA programs. These programs have proven very successful. A number of Canadian jurisdictions also operate such programs.

4) How do I determine whether client funds
should be placed in an IOLTA account?
You should follow the criteria found at ORPC 1.15-2(c)(d) when deciding whether funds are of a sufficient amount or duration to earn interest for the client, net of bank charges or administrative fees, thus justifying placing them in individual accounts for the benefit of individual clients or placing them in an IOLTA account.

If a lawyer or law firm determines that a particular client’s funds in an IOLTA account did earn net interest that has been remitted to the Oregon Law Foundation, the lawyer can request a refund pursuant to ORPC 1.15-2 (f).

5) What are the tax consequences of participation in the program?
There are none to the attorney or the client. The Oregon Law Foundation, which receives the interest income, is tax-exempt. The Internal Revenue Service stated in Revenue Ruling 81-209 that the interest earned on nominal and short term client advances, which is paid over to a bar foundation pursuant to a court-established program, is not includable in the gross income of any client.

6) How does IOLTA affect my clients?
It does not affect your clients. Interest earned on IOLTA accounts is earned on funds that otherwise would not be invested in the client's behalf. Therefore, the client would not earn interest on these funds under any circumstances.

7) What about bank service charges?
Fees for wire transfer, insufficient funds, bad checks, stop payment, account reconciliation, negative collected balances and check printing are not considered customary account maintenance charges and may not be assessed against an IOLTA account. Such non-routine fees are the responsibility of the lawyer or law firm who may absorb these specific costs or pass along those fees to the client(s) being served by the transaction (in accordance with attorney/client agreements).
The service fees that are considered customary account maintenance charges are charged against the interest earned on the IOLTA account. The Oregon Law Foundation works with banks to encourage them to waive services charges associated with IOLTA accounts. This ensures that a maximum amount of funding is remitted to the foundation. Many banks waive the service charges associated with IOLTA accounts.
If there is a service fee charged, each bank has a different policy regarding IOLTA accounts. Some banks subtract the service charges from the interest earned up to the amount of interest earned and no more. Other banks subtract service charges in excess of interest earned from the interest earned on other IOLTA accounts before sending the money to the foundation.

8) How do I open an IOLTA account and
what are the reporting requirements?
The Oregon Supreme Court established a mandatory IOLTA program in 1989. All lawyers and law firms handling client funds that cannot earn interest for the client net of banking charges and administrative fees must put these funds in an IOLTA account. The following is guidance when opening an IOLTA account:
  1. The bank must use the Oregon Law Foundation Tax ID number on the account. The tax ID number is #93-0817536.

  2. To assist you in opening an IOLTA account download and take to the bank a document called Notice to Financial Institutions. This is not mandatory but some financial institutions such as US Bank require documentation before opening an IOLTA account and this form should help meet that requirement. Although most banks don't require this form it is beneficial when opening an IOTLA account because it helps the financial institutions better understand what kind of account you are requesting.
  3. Click here for Notice to Financial Institution

  4. After establishing your IOLTA account pursuant to Oregon RPC 1.15-2 (m) you must complete a form called Notice of Enrollment Interest on Lawyer's Trust Account (IOLTA) Program and submit it to the Oregon Law Foundation.
  5. Click here for Notice of Enrollment Form

  6. Oregon RPC 1.15-2 (m) requires that every lawyer shall certify annually that they are in compliance with Rule 1.15-1 and 1.15-2. The certification must be completed and signed by all active members of the Oregon State Bar. This includes members who do not have a trust account or are employed by a firm that has office staff who process the Membership Fee Statement.

    Click here for Annual Certification with Oregon RPC 1.15-2

After the IOLTA account is open the bank be responsible for remitting any interest from the account to the Oregon Law Foundation.

9) How do I select a bank?
Financial institutions play a significant role in the success of the IOLTA program. The amount of funding generated through IOLTA each year is dependent upon several factors, including interest rates and bank-imposed service fees. You can help the Oregon Law Foundation by establishing your IOLTA account at (or moving your IOLTA account to) a bank that is committed to maximizing the rate of return on IOLTA accounts. The Oregon Law Foundation's "Leadership Banks" have shown such a committment.

Click here to view the Oregon Law Foundation’s Leadership Banks.

10) How can I find out more about IOLTA?
You may contact the following Oregon Law Foundation Staff:
Judith Baker
Executive Director

16037 SW Upper Boones Ferry Road
Tigard, Oregon 97224
(503) 431-6323
E-mail: jbaker@osbar.org

Dawn Nelson
Administrator/Bookkeeper

16037 SW Upper Boones Ferry Road
Tigard, Oregon 97224
(503) 431-6373
E-mail: dnelson@osbar.org