What is IOLTA?
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
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
into interest-bearing trust accounts. Currently, the IOLTA Program
is now being offered by over two hundred and fifty financial
institutions 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.