What is IOLTA?
IOLTA is an acronym for Interest on Lawyer’s Trust Accounts. Attorneys routinely receive funds to be held in trust for future use. Funds of a substantial amount or which are to be held for a long period of time are usually placed in an interest bearing account for the individual client’s benefit. If funds are small in amount or to be held for a short period of time, they are usually commingled in a non-interest bearing checking account. This is done because the interest generated by these funds would not be enough to benefit the individual client.
The U.S. Supreme Court ruled on March 26, 2003 and issued its decision in Brown v. Legal Foundation of Washington, upholding the constitutionality of IOLTA under the Just Compensation Clause of the Fifth Amendment.
The rules governing IOLTAs in Alabama are found in Rule 1.15 of the Alabama Rules of Professional Conduct, adopted by the Alabama Supreme Court. The Supreme Court of Alabama mandated that beginning in January 2008 all pooled trust accounts must be established as an IOLTA. All Alabama attorneys are required each year to certify through the State Bar that their trust account is established as an IOLTA. Those attorneys that do not have a trust account may indicate so in the certification process.
The Alabama Civil Justice Foundation, one of two IOLTA foundations in Alabama, was approved by the Alabama Supreme Court in 1992 to receive interest from IOLTA accounts. Attorneys may designate ACJF to receive interest from their IOLTA account/s. The bank will remit the interest from each account monthly or quarterly. The funds are used to award grants to nonprofit organizations in Alabama providing civil legal aid and social services for disadvantaged families and children.
To designate a new or existing IOLTA to ACJF, an attorney should use our simple Establishment Form. All an attorney will need to do is complete, sign and then give the form to the financial institution. Most financial institutions will have a copy of the form. One can also be accessed from this web-site.