Q. What is IOLTA?

A. The North Carolina State Bar Plan for Interest on Lawyers' Trust Accounts ("IOLTA") was established in 1984 by the North Carolina State Bar and the North Carolina Supreme Court to generate income from lawyers' trust accounts in order to fund programs for the public's benefit.

Q. Does participation in IOLTA affect my current trust account practices?

A. No. Participation in IOLTA will not affect a lawyer's current trust account practices. The depository bank will calculate and remit all accumulated interest, less service charges, directly to IOLTA. Participation in IOLTA will never affect the principal balance of the account. Of course, lawyers still retain complete discretion to determine whether a trust deposit is of sufficient size or duration to justify placement in a separate interest bearing account.

Q. How are service charges on IOLTA accounts handled?

A. The IOLTA program pays normal service charges on all IOLTA accounts. All participating banks have been instructed to deduct such charges from accumulated interest due IOLTA. IOLTA does not pay for service charges resulting from NSF notification, stop payment charges, or check printing charges. However, IOLTA will pay a one time check printing charge if, in order to participate, a lawyer must obtain a new trust account number or change banks.

Q. How are clients informed of a lawyer's IOLTA participation?

A. In 1988, the North Carolina Supreme Court approved the posting of a Client Notice Certificate in order to inform clients of a lawyer's participation. IOLTA provides Client Notices to participating attorneys at no charge.

Q. What are the tax consequences of IOLTA participation?

A. According to the Internal Revenue Service, IOLTA participation imposes no tax consequences to the client or the lawyer. See Revenue Ruling 81-209. Each IOLTA account will bear the tax identification number of the IOLTA Board of Trustees to ensure that all accumulated interest is reported as income of the IOLTA program.

Q. Does participation in IOLTA deprive clients of any funds to which they are entitled?

A. No. Trust moneys of the type to which IOLTA applies (nominal in amount or expected to be held for a short duration) have traditionally been deposited in lawyers' common trust accounts that do not earn interest. The North Carolina State Bar now allows such accounts to earn interest for the benefit of the IOLTA program.

Q. Will my IOLTA decision carry any consequences in regards to the State Bar Random Audit of Trust Accounts or any other aspect of the State Bar's grievance and disciplinary activities?

A. No. IOLTA is administered and staffed independently from the random audit program and grievance and disciplinary activities of the State Bar.

Q. How do I join IOLTA?

A. Complete and sign the IOLTA Decision Form and return it to the IOLTA office. The IOLTA staff will contact your bank to have your trust account established as an IOLTA account.

Q. What if my bank does not participate in IOLTA?

A. Complete the IOLTA Decision Form. The IOLTA staff will contact your bank to explain the program and determine if they will participate. IOLTA will notify you of your bank's decision.

Q. How are IOLTA funds used?

A. The North Carolina State Bar and the North Carolina Supreme Court allows IOLTA funds to be used, after administrative expenses, to fund grants under the following four categories:

1. providing civil legal aid to indigents;

2. enhancement and improvement of grievance and disciplinary procedures for lawyers;

3. development and maintenance of a fund for student loans for legal education on the basis of need; and

4. such other programs designed to improve the administration of justice as may be proposed by the IOLTA Board of Trustees and approved by the North Carolina Supreme Court.

For more information about IOLTA, please contact our office. We are here to serve you.