Opening an IOLTA
To open an IOLTA, you may need the following:
- The OLF’s tax ID, 93-0817536, must be attached to the account.
- Notice to Financial Institutions (pdf): The OSB does not require this form; however, some banks request documentation before opening an IOLTA. Even when not requested, this form can help a bank understand what kind of account you are requesting.
After the account is open, the bank will send any interest to the Oregon Law Foundation.
Moving to a Leadership Bank
3 easy steps to move your IOLTA to a Leadership Bank or Credit Union:
- Review your current IOLTA for outstanding payments that have not yet cleared
- Open a new IOLTA at a Leadership Bank or Credit Union
- Transfer the balance to your Leadership IOLTA, minus outstanding payments.
You can have more than one IOLTA account, so do not feel rushed to close your old account if you are waiting for clients to cash payments.
Where to Open an IOLTA
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 at (or moving your IOLTA to) one of our Leadership Banks & Credit Unions. Our Leadership Banks & Credit Unions pay the Oregon Law Foundation above-market interest rates on IOLTA deposits.
Making Oregon and Washington IOLTA Rules Work Together
If you are an Oregon bar member, you are required to maintain an IOLTA where your office is located. If you are a Washington bar member, you are required to use a Washington IOLTA when you have funds as a result of practice under your Washington license. Oregon bar members who are also licensed in Washington often solve the overlap of rules by maintaining two IOLTAs: a Washington IOLTA for work done for Washington clients and an Oregon IOLTA for work done for Oregon clients.
What Goes into an IOLTA
ORPC 1.15-2 (c)(d) sets up the criteria for IOLTA. If a client’s funds are too small in amount or held for too short of a time to earn interest for the client, net of bank charges and your administrative costs, place them in an IOLTA. Your administrative costs include things like your or your staff’s labor and time to open, balance, and maintain a separate account, the labor cost of crediting interest to the client, and the labor cost of preparing tax-related documents related to a non-IOLTA lawyer trust account. Remember, there are no tax reporting requirements for an IOLTA!
An IOLTA has no effect on clients. Legal professionals only place funds in IOLTA that otherwise would not produce net income for a client. Therefore, the client suffers no loss from IOLTA interest paying to the OLF.
If a legal professional later determines that a particular client’s funds in an IOLTA account would have earned net interest, a refund of what the client would have earned may be requested pursuant to ORPC 1.15-2 (f). When determining the interest a client’s funds could make in a separate account, use the bank’s normal interest bearing account rate and not the OLF Leadership rate.
For more details on using an IOLTA, see the Professional Liability Fund’s Guide to Setting up and Using Your Lawyer Trust Account (pdf).
FDIC & NCUA Deposit Insurance
IOLTA accounts can only be offered by financial institutions that participate in a deposit insurance program: FDIC for banks and NCUA for credit unions. Under the fiduciary account rules for deposit insurance, as long as an account is properly designated as an IOLTA or lawyer trust account and the legal professional has good records, each client is protected up to the standard deposit insurance limits, currently $250,000. To learn more, look for the Fiduciary Accounts section of the FDIC’s Your Insured Deposits brochure.
Taxes
There are no tax consequences for legal professionals or clients from using an IOLTA. See IRS Revenue Ruling 81-209 and Revenue Ruling 87-2.
Account Fees
Banks may only apply IOLTA service charges against the interest paid to the OLF. Service charges include monthly maintenance fees, per item check charges, items deposited charges, and per deposit charges.
Legal professionals are responsible for all other fees or transaction costs including fees for wire transfer, electronic transfer, non-sufficient funds, bad checks, stop payment, account reconciliation, negative collected balances, and check printing. Legal professionals may absorb these costs or pass them to the clients if specified in their fee agreements.
Reporting to the Bar
ORS 9.675 requires all active bar members to certify annually whether they have Oregon IOLTA(s) and disclose the bank(s) and account number(s) of those IOLTA(s). Included in those who must certify annually are the following:
- Those who reside in another state must certify.
- Members who do not have a trust account must certify and check the proper reason for not having an account.
- Those employed by a firm that holds a central IOLTA must certify with the firm’s IOLTA information.
- Those who are active bar members who limit their work to serving as arbitrators or mediators must certify annually and place any advance arbitration or mediation fees in a trust account. See OSB Formal Ethics Opinion 2005-135.
- Active Pro Bono Members who maintain their own IOLTA account used for pro bono clients or arbitration/mediation advances must certify with their account information.
Individual bar members can certify compliance through the OSB member portal, and Firm administrators can report for multiple legal professionals through the firm portal. Additional IOLTA reporting information is available from the Oregon State Bar.
Planning Ahead
If you are a sole practitioner or the only signer on an IOLTA account, it is good practice to plan ahead for how your trust account will be handled if you pass away or are incapacitated. Failing to plan ahead could require a long and expensive process to wind down your practice and return funds to clients. The OSB Professional Liability Fund created the handbook Planning Ahead: A Guide to Protecting Your Clients’ Interests in the Event of Your Disability or Death to describe the process of designating an assisting attorney in advance.
When Things Go Wrong
Disappearing Clients: Abandoned Funds
After two years of trying to find a client or trying to get a client to accept a payment from your trust account, Oregon’s Unclaimed Property Laws require you to send the abandoned funds to the Oregon State Bar and provide information about the owner of the funds to both the Bar and the Oregon Department of State Lands. More details are on the Oregon State Bar Unclaimed Client Funds webpage.
Overdrafts
If there is an overdraft on your trust account, you must contact Oregon State Bar Disciplinary Counsel with information about your bank, information about who you are, your account number, and either the date of the overdraft or the date your check or payment was returned. See ORPC 1.15-2(l) for more details.
Money Disappearing from a Trust Account
If client funds are stolen or disappear from your trust account, there are several issues and duties to consider. Oregon Formal Ethics Opinion 2022-199 discusses some steps that may be taken. You can get additional information from the Oregon State Bar Ethics Help Line, 503-431-6475.
Incapacity of an IOLTA’s Sole Signer
If a plan was made in advance, an assisting attorney can help wind down a practice and get funds from an IOLTA back to clients. If a plan was not made in advance, the court may need to specifically appoint an attorney as custodian of the practice under ORS 9.705–9.755 in order to liquidate the IOLTA. The Practice Management Team at the PLF might be able to help figure out what options are available.