What is IOLTA?

The Nebraska Lawyers Trust Account Foundation (NLTAF) administers the Interest On Lawyers Trust Account (IOLTA) Program per Nebraska Supreme Court Rules concerning Trust Accounts, Rule 1.15 of the Nebraska Rules of Professional Conduct, and Trust Account Overdraft Notifications. The following is a brief history of IOLTA.

Traditionally, lawyers have been ethically bound to keep clients' funds separated from their own in a separate trust account. Usually the funds were held in a regular bank checking account. In May, 1984, the Supreme Court of Nebraska amended the Code of Professional Responsibility, Disciplinary Rule 9-102, to allow for the establishment of interest-bearing client accounts. The Supreme Court Rule specifically authorizing the establishment of interest-bearing trust accounts for client funds was adopted. These client funds are nominal in amount or held for a short period of time. This rule stated that the sole beneficiary of the interest on the accounts must be the Nebraska Lawyers Trust Account Foundation and these accounts must be readily available for withdrawal.

In December 1992, the Supreme Court of Nebraska adopted an amendment to the above Rule that requires all lawyers or law firms to maintain an interest-bearing account, unless an individual opts-out. A lawyer or law firm may decline (or opt-out) to participate in the program by filing a Notice of Declination with the Nebraska Supreme Court by February 15 of each year.

The basic concept of an IOLTA Program is that public good can be promoted by converting non-interest bearing trust accounts into interest-bearing trust accounts. Currently, the IOLTA Program is now being offered by over two hundred and fifty financial institutions (pdf) across the state.

For member banks, the Federal Reserve System has authorized for deposit in NOW (Negotiable Order of Withdrawal) accounts funds deposited pursuant to the IOLTA Program established by the Nebraska Supreme Court Rule. The Federal Deposit Insurance Corporation has concurred in this opinion of the Federal Reserve System for institutions insured by the FDIC. The Federal Home Loan Bank Board has also issued similar authority for those institutions which are Federal Savings and Loan Insurance Corporation (FSLIC)-insured savings and loan associations or savings banks. (Copies of letters available upon request.)

Only simple reporting mechanisms are needed to operate the IOLTA program. The IOLTA accounts will be similar to other interest-bearing accounts offered by financial institutions, except financial institutions remit interest earned on IOLTA accounts at least quarterly to NLTAF. A statement showing the account name, service fees deducted, and the amount of interest earned by the account should be forwarded to NLTAF. The participating attorney or law firm should receive a copy of the statement. Customary financial institutions' service charges for maintaining the account will be deducted from the interest generated by the account. If the interest is insufficient to cover the cost, charges are provided from subsequently earned interest or by NLTAF. As a result, financial institutions will be compensated for administrative costs related to the program.

NLTAF is a 501(c)(3) tax-exempt organization and is administered by a fourteen member Board of Directors. The Foundation is headquartered at the Roman L. Hruska Law Center, P.O. Box 95103, Lincoln, Nebraska 68509, telephone: (402) 475-1042.