Are you new to IOLTA Client Trust Accounts??
If you are a new Lawyer and/or you’re considering launching a solo practice you need to be ready to manage your finances and this includes your client’s funds as well.
Like any business you will need to open a new bank account, but in a Law practice you need to open a second bank account known as IOLTA (Interest on Lawyer Trust Account) or Client Trust Account.
IOLTA or CTA is used to keep client’s funds (retainer/advances, including any settlement funds) separate from your Operating account. You are allowed to pool all these client’s funds onto a single IOLTA or CTA but If you have a significant amount from only one client it is recommended to open a second IOLTA just to manage those funds. Interest generated from IOLTAs funds are transferred to the State Bar Association.
Every state has a Bar Association that dictates guidance on how you need to manage this specific account, in some states IOLTA is mandatory while in others it is optional, either way, we want to offer you a glimpse of some basic principles you need to know.
Commingling IOLTA’s funds with attorney’s funds is not allowed.
Attorney’s cannot use the CTA funds to pay any personal or business expenses.
You should not advance funds to a client in connection with the payment for a settlement before the settlement check clears.
Only after services have been rendered, you can remove funds from CTA to your Operating account, and this should be in a timely manner.
There should be an individual ledger for each client, and all transactions should be appropriately recorded against the overall account.
Always be audit-ready, not following complicience can revoke your license.
Records must be preserved for a period of 7 years following the last transaction.
Consult your state bar’s IOLTA account rules to determine what types of funds must be deposited in individual accounts, and for guidance about general questions about IOLTA accounts.
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