Q: What Is IOLTA?
A: In 1984, the Supreme Court of Missouri created the Interest on Lawyers’ Trust Accounts (IOLTA) program in Missouri, Supreme Court Order: In Re DR9-102, 675-676 S.W.2d XXVII (Oct. 23, 1984). Many lawyers maintain trust accounts in which funds are held on behalf of clients or third parties for distribution at a later date. In some cases, these fund balances are large and are held for long periods of time, but, more than likely, the balances are small and/or are held for a short period of time. IOLTA requires attorneys to place these typically commingled nominal and/or short-term client trust funds into interest bearing accounts. The institutions then remit the interest earned on these funds to a designated administrative body, which in Missouri is the Missouri Lawyer Trust Account Foundation. These funds, in turn, are distributed as grant awards to non-profit organizations to provide civil legal services to the poor and to conduct programs that improve the administration of justice.
As of January 2008, the Supreme Court of Missouri amended Rule of Professional Conduct 4-1.15, to require attorneys to place all IOLTA trust funds into interest bearing accounts at “eligible” financial institutions. The United States Supreme Court previously upheld the constitutionality of mandatory IOLTA programs in Brown V. Legal Foundation of Washington, 538 U.S. 216 (2003)
Q: Is the IOLTA program unique to Missouri?
A: No. All fifty states, the District of Columbia and the Canadian provinces have IOLTA programs. Missouri was the 30th state to adopt an IOLTA program in 1984. The programs range from VOLUNTARY (which gives an attorney a choice to participate), to OPT-OUT to MANDATORY. Missouri began as a voluntary program, became an opt-out program in 1990 and converted to a mandatory program in 2008. Thirty-seven states now have mandatory programs, and that number is expected to increase.
Q: If I have an IOLTA account in another jurisdiction am I required to have a Missouri IOLTA account, too?
A: Possibly. One should review the exemptions in Supreme Court Rules 4-1.15(l)(3) and (l)(4) to see if they apply to your situation. Many attorneys and/or firms are establishing IOLTA accounts for each jurisdiction in which they practice to ensure compliance with the rules of each state.
Q: Why is the Tax Identification Number on IOLTA accounts the number for the Missouri Lawyer Trust Account Foundation?
A: The Tax Identification Number ("TIN") 43-1355525 should be the number attached to every IOLTA account. This ensures the Foundation is the beneficial owner of interest monies that accrue and allows the Foundation to debit those funds once a bank notifies the Foundation that interest was paid. No attorney or firm should attach its unique TIN to IOLTA accounts as it is impermissible for licensed attorneys to earn interest on client funds and these are reportable transactions to the Internal Revenue Service.