IOLTAs affected by 2013 expiration of Dodd-Frank provision
Published: February 6, 2013
The Ohio Legal Assistance Foundation recently learned that some attorneys might be driven to break up their Interest on Lawyer Trust Accounts (IOLTAs) thanks to the Federal Deposit Insurance Corporation ending unlimited coverage on the charitable interest accounts.
On Jan. 1, the a Section 343 of the Dodd-Frank Act expired, reverting all types of trust accounts, including IOLTAs, to the same standard maximum deposit insurance amount of $250,000 as personal accounts. Each client’s funds are still insured up to $250,000 per IOLTA account if the account’s records indicate it is custodial or fiduciary and that the attorney-client relationship and financial records are “maintained in good faith and in the regular course of business.”
If an account with multiple clients meets these conditions, even if the account’s amount exceeds $250,000, FDIC coverage should cover that amount per client.
“If attorneys are properly maintaining IOLTA accounts, the transition to standard maximum deposit insurance should be seamless,” said Ohio Legal Assistance Foundation Executive Director Angela Lloyd. “The funds of each and every client will be protected to the maximum amount provided by the FDIC.”
On its website, the FDIC clarified that “if a law firm maintains an IOLTA with $250,000 attributable to Client A, $150,000 to Client B, and $75,000 to Client C, the account would be fully insured if the IOLTA meets the requirements for pass-through coverage. If the clients have other funds at the same [FDIC-insured depository institution], those funds would be added to their respective shares of the funds in the IOLTA for insurance coverage purposes.”