The Nuts and Bolts of IOLTA in NC

Throughout 2009, The North Carolina State Bar Journal, celebrated the 25th anniversary of the Plan for Interest on Lawyers Trust Accounts,  more commonly known as “NC IOLTA.”  The Bar Journal recently published a 3-part series on the development, implementation and pit-falls of the program in NC. After reading this series, I thought I would pass it along to the CSL community of new and soon-to-be lawyers.

How was this program established?

Among some anxiety, the North Carolina State Bar Council approved and formed the voluntary IOLTA program.  Then, with the approval of the NC Supreme Court changes were made to the Code of Professional Responsibility allowing and mandating IOLTA accounts.

How does this program work?

In general, attorneys and firms often handle money that belongs to clients.  The money that flows through the firm to the client is often relatively nominal and is usually only held for a short period of time.  Traditionally, attorneys keep these deposits together in a trust account, thus holding a fiduciary relationship with the general trust account.   Additionally under the NC Professional Rules of Conduct, Rule 1.15-1 defines generally how accounts interplay within the attorney-client relationship.

According to the NC State Bar website, “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. By order of the NC Supreme Court, beginning in 2008, lawyers must have all general client trust accounts established as IOLTA accounts. Only dedicated lawyer trust accounts (those maintained for the sole benefit of a single client or transaction) will not be IOLTA accounts.” As a side note, lawyers’ operating accounts should not be IOLTA accounts.

As a new attorney, how do I set this up?

The NC State Bar website is a great place to start.  There is a checklist available for general use by lawyers, as well as information on remittance and reporting on these accounts. Also, the State Bar has provided a list of all the participating banks in the IOLTA program, so you can see which banks in your area participate.  Lastly, under NC Rules of Professional Conduct Rule 1.15-3, lawyers are responsible to clients for reporting and accounting for firm deposits and accounts.

For more information, go to the IOLTA NC State Bar website.

-Liz McCurry-

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