What Is An IOLTA Account?


Interest on Lawyers Trust Accounts, or IOLTA accounts, were created by the federal government to raise money for civil legal services for indigent persons. When an attorney takes on a client, money is often placed into an account for services prior to when they are rendered. By placing this money into an IOLTA account, the funds earn interest for the state’s IOLTA program, which finances civil legal services for those who cannot afford them.


IOLTA accounts were created in 1980, when the Congress modified federal banking laws. Prior to the modification, banks were forbidden to pay interest on checking accounts, which resulted in lawyers placing client funds into noninterest-bearing accounts. In 1981, the first IOLTA account was created in Florida to hold client funds and accumulate interest to be pooled and used to fund civil legal services for indigent persons. Today, all 50 states and the District of Columbia make use of an IOLTA program.

Client Funds

A lawyer is not required to place all client funds into an IOLTA account. If the client transfers a large amount of money to the attorney, the money is typically placed in an interest-bearing account and the client receives the interest. However, there are times when the amount of money is too small, or the amount of time it will be in an account too short for an interest-bearing account to be cost-effective. In this situation, the attorney places the funds into an IOLTA account.


In 2003, IOLTA programs were challenged in court. Those opposed to the accounts argued that the interest was the property of the client or the attorney, and the government was unconstitutionally taking the money through the IOLTA account. The U.S. Supreme Court ruled that the accounts were constitutional because the client would not have earned interest on that money if the IOLTA accounts did not exist.

FDIC Insurance Coverage

Money placed into an IOLTA account is insured by the FDIC. Congress enacted a law in 2010 that extended unlimited FDIC insurance to interest-bearing IOLTA accounts. The law makes up for an oversight in the Dodd Frank Wall Street Reform and Consumer Protection Act, also signed into law in 2010, which extended FDIC insurance to noninterest-bearing accounts, but left out an extension for IOLTA accounts.

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