What is IOLTA?
IOLTA stands for "Interest on Lawyers' Trust Accounts." Rule 4-100 requires that attorneys who handle money belonging to their clients, including settlement checks, fees advanced for services not yet performed or money to pay court fees, deposit the funds in one or more clearly identifiable trust accounts.
"All funds received or held for the benefit of clients by a member or law firm, including advances for costs and expenses, shall be deposited in one or more identifiable bank accounts labeled, 'Trust Account,' 'Client's Funds Account' or word of similar import..."
If the amount is large or the funds are to be held for a long period of time, the attorney must place the money at interest for the benefit of the client.
However, if the client funds are not capable of earning income for the client in excess of the costs of securing such income, including staff time and expenses to segregate those amounts, then they are pooled in a single account with similar funds of other clients.
Before IOLTA, these funds were deposited into non-interest -bearing checking accounts. Currently, under rules and/or statutes in every state, an attorney may or must pool nominal or short-term client funds in an interest-bearing account.
In California, IOLTA interest income supports approximately 100 nonprofit legal aid organizations that provide civil legal aid to indigent and low-income people, seniors and persons with disabilities.