What is the Interest on Lawyer Trust Accounts (IOLTA) Program?
"IOLTA" stands for Interest on Lawyer Trust Accounts. An IOLTA account is a pooled, interest-bearing demand deposit account used by lawyers to hold client funds. IOLTA is an idea that originated in British, Canadian and Australian jurisdictions in the 1960s. In the United States, IOLTA was pioneered in Florida and now exists in every state in the country. The New Mexico IOLTA program was approved by the State Supreme Court in 1984.
Through IOLTA, attorneys and firms may pool otherwise unproductive client funds in interest bearing accounts. Only those funds that are either nominal in amount or held for a relatively short period of time (making investment on the client's behalf impractical) are eligible to earn interest for the IOLTA program. That interest is then paid to the State Bar of New Mexico, the administrator of IOLTA, for distribution to programs that provide legal services to poor people, public law-related education or improvements in the administration of justice.
Participation in IOLTA does not affect the administrative duties of managing a trust account. Upon opening or the conversion to an IOLTA account, the only change that will occur is that the trust account will generate interest, and the bank statements for the account will reflect the interest earned and paid to the IOLTA program. Additionally, there are no tax consequences for the financial institution, the law firm or the client.
Enrolling in IOLTA is easy! By completing a simple form (Attorney Notice to Financial Institution), attorneys can instruct their financial institutions to open a new account or convert their existing trust accounts to interest-bearing IOLTA accounts. Nearly all New Mexico financial institutions are cooperating partners in the IOLTA program. However, if an attorney wishes to establish an IOLTA account at a nonparticipating institution, the State Bar would be happy to provide assistance to both the attorney and the bank. You may learn more about the IOLTA Program by visiting www.nmbar.org or e-mailing firstname.lastname@example.org.
To enroll, the attorney should complete and submit the Attorney Notice to Eligible Financial Institution to an eligible financial institution. This form instructs your financial institution to open a new account or convert your existing trust account to an interest-bearing IOLTA account. Please read and follow the instructions on the notice carefully. If you have any additional questions please contact the IOLTA program by emailing email@example.com.