IOLTA

Banking laws do not permit corporations or partnerships to set up NOW accounts, so how can my firm participate?

The Arkansas IOLTA Foundation is eligible to maintain NOW accounts because it is a IRC section 501(c)(3) nonprofit corporation.  Since the interest on an IOLTA account is paid to the Foundation for charitable and educational purposes, the Federal Reserve has ruled that any law firm can have a NOW account as long as it is an IOLTA account.

How much of my time and money does maintaining an IOLTA account involve?

Very little time and no money.  The mechanics of establishing an IOLTA account are simple and, once it is done, no further time or effort by the attorney is required unless the attorney changes banks.  After the lawyer completes the one-page form, the IOLTA staff handles all the paperwork with the bank.

Any changes or fees associated specifically with having an IOLTA account are paid by the IOLTA Foundation.  Lawyers pay for check printing and fees not specifically related to having an IOLTA account, such as wire transfers and check overdraft charges.

What if my client trust account is rarely used and typically has a small balance?

Every lawyer is required to establish his or her client trust account as an IOLTA account.  However, if the account loses money because the interest earned is less than reasonable fees and charges, then the Foundation Board may, either in response to a request or on its own, exempt the lawyer from maintaining an IOLTA account.  This exemption will be subject to periodic review.

Do different financial institutions have different fee schedules and interest rates for IOLTA accounts?

Yes. Interest rates and service charges vary from bank to bank and even among different bank branches.  The IOLTA staff can tell you which financial institutions have the combination of fees and interest rates that will allow more of the interest earned to go to law-related public service projects.

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