The Berks Barrister Summer 2017 - 10

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Tips for Proper Management
of Your IOLTA Account
By Paula Barron

A

s a community bank, Tompkins VIST is fortunate
to have many law firms and attorneys as customers.
Through these relationships, I have learned that law
professionals often appreciate some education about Interest
on Lawyer Trust Accounts (IOLTAs) and why it is so crucial to
administer them properly.

First, A Quick Review
IOLTAs were introduced in the United States in the 1980s to
help those unable to pay for legal services. They're now required
in all 50 states and have been expanded to not only provide legal
aid in civil matters but also to fund grants to support the legal
system.

How IOLTAs Work
Funds from a client must be placed in a bank trust account
separate from a lawyer's business account. When the client
transfers a substantial sum of funds that will be held for a long
period of time, the lawyer invests the funds for the benefit of that
client. But for clients whose funds are sufficiently nominal or
short term that they won't earn interest, PA Rule of Professional
Conduct 1.15 requires attorneys to place those funds in an
interest bearing IOLTA. Since 2008, when the recession
prompted a drop in IOLTA funds, the IOLTA board has also
required certain other legal fees to be placed in IOLTA accounts.
IOLTAs are available at banks that are approved for such
accounts. There about 200 of these banks in Pennsylvania and
a few are "Platinum Leader Banks," which means they pay a
premium annual percentage yield of 1 percent or more. In Berks
County, First Priority, Fulton, as well as Tompkins VIST are
Platinum Leader Banks.
At least quarterly, the bank transfers the interest from
IOLTAs to the PA IOLTA board. After approval from the
Pennsylvania Supreme Court, the board distributes annual
grants for a variety of programs for non-profits as well as for pro
bono representation. These grants are enormously valuable since
Pennsylvania has only one legal aid lawyer for every 6,415 people
living in poverty.
10 | Berks Barrister

Tips for Managing Your IOLTA Account
(Especially if You Are in Individual Practice)
The improper management of an IOLTA account can result
in serious consequences to an attorney's career, and misuse is
especially possible for individual attorneys who don't employ
practice managers. (In Pennsylvania, 50 percent of attorneys are
in individual practice.)
So here are some tips to assure you're using your trust accounts
properly:
* Don't borrow money from the trust account. It's tempting
to consider taking trust account funds before they're earned,
especially in situations where you have large upcoming
expenses to pay. But bear in mind that, even if you have
every intention of paying the account back, the amount you
owe can snowball.

* Don't combine your IOLTA account and your business
account. It's possible for uninformed attorneys to put their
trust funds and operating funds in one account. This can
happen when they ask the client to write one check to cover
legal fees as well as court filing fees. In this example, the
court filing portion of the check dictates that the entire
check must go into the trust account. It's also important to
regularly remove earned fees and reimbursements from the
IOLTA account rather than move them into a "slush" fund
to pay future expenses or to hide assets.
* Remember to track client funds properly. Good ethical
practice requires you to keep records so you can identify
specific client funds, so:

* Put the client's name on the trust account checks. This
will help you recall the purpose of the check months
from now.

* Keep a ledger for each client, rather than keeping the
information in your head.
If your firm doesn't have a practice manager and you seek
guidance about IOLTAs or require more information, you can
visit www.paiolta.org.
http://www.berksbar.org/ http://www.paiolta.org
The Berks Barrister Summer 2017

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