Q. Should I open an IOLA Account?
New York attorneys who hold "qualified funds" (as explained below), in trust for a client or third-party beneficial owner are subject to the IOLA Fund's New York State statutes and regulations and must open and maintain an IOLA escrow account.
Q. What are “qualified funds”?
Funds held in trust by an attorney that are “too small in amount or are reasonably expected to be held for too short a time to generate sufficient income to justify the expense of administering a segregated account for the benefit of the client or beneficial owner” are “qualified funds” and are appropriate for deposit in an IOLA account. See Judiciary Law 497 §2 and Section 7000.2(d) of the Trustees Regulations.
Q. Who determines whether funds are "qualified funds"?
The determination is made solely in the judgment of the attorney who holds the funds in trust. New York has a statuary hold-harmless provision. New York attorneys shall neither be liable in damages nor held to answer for a charge of professional misconduct because of a deposit of moneys into an IOLA account, pursuant to the attorney's good-faith judgment that such moneys were qualified funds. §Judiciary Law 497(5); 21 N.Y.C.R.R. 7000.8(b).
Q. Does the Fund provide a benchmark for determining whether a sum of money is appropriate to be placed in an IOLA?
No, the attorney makes that determination taking into account the amount of deposit, the duration it is expected to be held, and current interest rates and bank fees on non-IOLA escrow accounts.
Q. How do I open an IOLA account?
Please click here to complete an online Enrollment Form -- it comes with detailed instructions on opening an IOLA account.
Q. How do I choose a bank?
Approximately 200 banks statewide participate in the IOLA program. The IOLA Fund maintains an up-to-date list of participating banks on this site. Banks in the first tier (Platinum Partners) have generously agreed to offer favorable rates. Banks that waive fees are also indicated. Opening an account at a bank that pays a higher rate and waives fees means that more interest will go to help low-income New Yorkers get the civil legal assistance they need from the Fund’s grantees.
Q. Can I maintain multiple IOLA accounts?
The underlying concept of an IOLA account is that all of an attorney’s qualified funds may be pooled into a single account, thus reducing the bank fees that the Fund must pay and increasing its yield per account. In addition, many banks pay tiered rate structures on IOLA accounts, resulting in higher yields for IOLA on those accounts that have higher balances.
Q. How Should I title my IOLA account?
All IOLA Account must contain the attorney's name followed by the acronym IOLA and must end in one of the following phrases; Attorney Trust Account, Attorney Escrow Account or Attorney Special Account. For details, see A Lawyer's Guide to Opening an IOLA account.
Q. Which fees does the Fund pay?
The Fund pays for regular monthly maintenance and service charges on IOLA accounts. These fees are ONLY paid out of the interest earned on the account, and should NEVER be taken out of the principal client funds. This means that if your bank charges $5.00 a month but your account only earned $3.50 in interest, the bank may only take $3.50 in charges for that month (though they may opt to carry the charge forward to be taken from future interest).
Q. Which fees must the attorney pay?
The attorney is responsible for paying any fees not mentioned above, including those associated with wire transfers, stop payments, or NSFs (overdrafts).
Effective January 1, 2010 attorneys who open new IOLA accounts will be responsible for paying the initial checkbook-printing fee. IOLA will no longer assume the cost after that date.
If the attorney maintains an operating account at the same bank, the bank may agree to arrange for fees to be taken from the operating account. Alternately, the attorney can deposit funds into your IOLA account in an amount sufficient to cover such fees before they are charged.
Q. Can I move my IOLA account to a different bank?
Yes. The process for changing banks is the same as for any other account. When opening an IOLA account at the new bank, follow the procedure explained above.
Q. I think my attorney stole my money. What do I do?
Clients who have lost money due to an attorney’s mishandling of escrow funds may apply for reimbursement to the Lawyer’s Fund for Client Protection.
Q. An attorney who maintained an IOLA account has died. What should be done about the client funds that are still in the account?
The procedure for designation of successor signatories is explained in the Disciplinary Rules of the Code of Professional Responsibility. See Rules of Professional Conduct: 22 N.Y.C.R.R. Part 1200, Rule 1.15 (g).
Q. Can I hold escrow funds in an IOLTA account in another state?
Every state has a program that is similar to New York’s IOLA Fund. Typically, they are known by the acronym “IOLTA” or “Interest On Lawyer Trust Accounts.” Since an IOLA account is an escrow account, the answer would depend on the nature of the matter as it relates to the funds held in escrow. If it would be appropriate to hold the funds in escrow in another state when all relevant considerations are taken into account, then there is no requirement that they should be placed in a New York IOLA account.
Q. How does the FDIC cover IOLA deposits?
The FDIC insures the owner of the Funds held in an attorney's IOLA escrow account at a bank. For details about the coverage, see www.fdic.org Please select the Coverage Disclosure and Regulatory Reporting Revisions Link.
Deposits in IOLA accounts held at credit unions are not insured by the FDIC but by the National Credit Union Share Insurance Fund, subject to limiting rules. See www.ncua.gov
Q. I would like to learn more about handling client funds. Are resources available to help me?
Yes. The New York State Bar Association publishes a comprehensive guide, “Attorney Escrow Accounts.” You can order a copy from the Bar’s website and it may be in your local courthouse or bar association library. Also, from time-to-time the State Bar and others offer CLE courses about handling client funds.
Also, please see the publications by the Lawyers' Fund for Client Protection here.
Disciplinary matters involving client funds are handled by the grievance committees at each of the Appellate Divisions.