IOLTA Information for Banks

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Bank Requirements for Opening an IOLTA Account

Banks not found on the Eligible Bank List must submit a compliance statement and receive approval prior to opening any NC IOLTA accounts. Once a bank has received approval and been added to the Eligible Bank List, their IOLTA product must adhere to their approved Compliance Statement. A new Compliance Statement must be submitted and approved prior to making changes to the IOLTA product. Please contact the IOLTA office for the Compliance Statement documents.

IOLTA Accounts: All general client trust accounts must be IOLTA accounts!!

NC IOLTA ACCOUNTS

All general client trust accounts must be IOLTA accounts. Lawyers often handle money that belongs to clients. Often, the amount of money that a lawyer handles for a single client is nominal and/or held for only a short period of time. Traditionally, lawyers have placed these individual deposits together into pooled trust accounts, called general trust accounts. IOLTA accounts are interest-bearing general trust accounts, from which banks forward the interest net of service charges to the State Bar’s IOLTA program, which uses the money to fund law-related charitable causes. Only dedicated lawyer trust accounts (interest-bearing accounts maintained for the sole benefit of a single client or transaction) will not be IOLTA accounts.

An amendment to the Good Funds Settlement Act (N.C. Gen. Stat. 45A-9) requires that interest bearing accounts of settlement agents handling closing and loan funds to be set up as IOLTA accounts.

Operating accounts should not be established as IOLTA accounts.

TRUST ACCOUNT RULES

The procedures and rules governing all lawyer trust accounts, including NC IOLTA accounts, are established by the North Carolina State Bar. For more information about the trust account rules, contact the NC State Bar at 919-828-4620 or refer to the Trust Account Handbook.

ELIGIBLE BANKS

As of July 1, 2010, all NC IOLTA accounts must be held at “eligible” banks. These banks are published on the NC IOLTA Eligible Bank List. For eligibility, banks must comply with the comparability requirement, service charge, and other provisions of Rules .1316 and .1317 stating IOLTA accounts must earn the highest rate of interest or dividends generally available to similarly-situated non-IOLTA accounts at that financial institution (called “comparability”).

The Rules also clarify how IOLTA service fees may be handled and the different product options available for meeting the requirements. View Revised Rule .1316 and Revised Rule .1317 which govern NC IOLTA accounts.

Lawyers and settlement agents must provide documentation to NC IOLTA when opening (or closing) IOLTA accounts; however, they do not need authorization from NC IOLTA to open an IOLTA account. Documentation can be provided by submitting the NC IOLTA Status Update Form. The NC IOLTA Status Update Form is available online or from the NC IOLTA office.

The Bank Directive on NSF Trust Checks is required by the NC State Bar for ALL lawyer trust accounts. The NSF form can be found here.

ACCOUNT NAME

Although the tax identification number of NC IOLTA will be assigned to all general trust accounts, the trust account and all checks should bear the name assigned by the lawyer/law firm to the account. A trust account and all checks must be clearly labeled as a "trust account." Lawyers can use identifying names on their accounts and checks, such as Real Estate Trust Account, General Trust Account, etc. The identifying account name can include the term IOLTA; however, it should be clear that the NC IOLTA program is not the fiduciary agent for the account.

For example, an appropriate title for a general trust account might be "The Trust Account of John Smith, Attorney" or "Smith, Jones & Williams Real Estate Trust Account” or Smith, Jones & Williams IOLTA Account."

TAX ID and 1099s

All NC IOLTA accounts should use NC IOLTA’s tax ID number. Please contact the NC IOLTA office for the tax id number. The interest earned on these accounts should not be reported as income of the lawyer or law firm. NC IOLTA is tax-exempt. If possible, please DO NOT issue a form 1099. If a 1099 must be generated, please make sure the name associated with the tax id number reads as follows: BOARD OF TTEES OF THE N CAROLINA ST BAR PL FOR INT ON LAWYERS TR ACCT. (This name should not appear on the trust account checks)

OTHER INFORMATION

Rules governing attorney conduct prohibit an attorney from benefiting from funds held or managed on behalf of clients. (See 27 NCAC 2 1.15-2(j))

No trust account, whether it is IOLTA or not, can be linked to an operating account to utilize the collected trust account balances to offset charges or fees attributable to operating accounts (see NC State Bar RPC 150).

Feel free to contact the NC IOLTA staff if you have any questions about opening an IOLTA account.


Remitting on NC IOLTA Accounts

REMITTANCE

Interest should be remitted to NC IOLTA monthly or quarterly. Payment on multiple accounts may be combined into one check or transfer. Interest can be mailed to NC IOLTA or remitted through the ABA Clearinghouse. For ACH instructions, please contact the IOLTA office.

REPORTING

The following information must be provided for each NC IOLTA account:

Account Name / Account Number / Gross Interest / Gross Service Charge / Net Interest / Interest Rate / Average Principal Balance / Earnings Period / Type of Account

Banks with over 100 accounts should report electronically although all banks are encouraged to utilize electronic reporting. Contact the IOLTA office to determine which method of electronic reporting is best suited for your operational procedures.

Two paper report formats are available from the IOLTA office; however, a bank’s system generated report can be substituted if all required information is provided. Please report on all accounts even if no interest was earned or paid during the period. In addition, please note if an account has closed.

ALLOWABLE REASONABLE SERVICE CHARGES (see NC IOLTA Rule .1316(e))

Eligible Banks may elect to waive any or all service charges on IOLTA accounts. If a bank does not waive service charges on IOLTA accounts, allowable reasonable service charges may be assessed but only against interest earned on the IOLTA account. Allowable reasonable service charges may be deducted from interest on an IOLTA account only at the rates and in accordance with the bank’s standard practice for comparable non-IOLTA accounts. Allowable reasonable service charges for IOLTA accounts are: (i) a reasonable account maintenance fee, (ii) per check charges, (iii) per deposit charges, (iv) a fee in lieu of a minimum balance, (v) federal deposit insurance fees, and (vi) automated transfer (Sweep) fees. No service charges in excess of the interest earned on the account for any month or quarter shall be deducted from interest earned on other IOLTA accounts or from the principal of the account.

All service charges other than allowable reasonable service charges assessed against an IOLTA Account are the responsibility of and shall be paid by the lawyer or law firm. These charges may be deducted from the firm’s operating account, billed to the firm or deducted from funds maintained or deposited by the lawyer in the IOLTA account for that purpose. Business costs or costs billable to others are the responsibility of the law firm and should not be charged against client funds in the account or against the interest or the earnings credit of an IOLTA account. Examples of such costs include but are not limited to check printing, NSF/OD fees, stop payment orders, wire transfer fees, account reconciliation, remote capture capability, on-line banking, digital imaging, CD Rom statements, or interest charged on uncollected balances (float).

No trust account, whether it is IOLTA or not, can be linked to an operating account to utilize the collected trust account balances to offset charges or fees attributable to operating accounts (see NC State Bar RPC 150).


For more information, please contact IOLTA.