Managing NC IOLTA Accounts | North Carolina IOLTA

All General Client Trust Accounts Must Be IOLTA Accounts

Lawyers handle money that belongs to clients. Often, the amount of money that a lawyer handles for a single client is nominal and/or held for only a short period of time. Traditionally, lawyers have placed these individual deposits together into pooled trust accounts, called general trust accounts. IOLTA accounts are interest-bearing general trust accounts, from which banks forward the interest net of service charges to the State Bar’s IOLTA program, which uses the money to fund law-related charitable causes. Only dedicated trust accounts (interest-bearing accounts maintained for the sole benefit of a single client or transaction) will not be IOLTA accounts.

All NC IOLTA accounts must have an NC licensed attorney associated with the account unless the account is established as a Settlement Agent account. An amendment to the Good Funds Settlement Act allows for nonlawyers meeting the definition of a settlement agent to open NC IOLTA accounts. For more information about Settlement Agent accounts, see the settlement agent FAQ page. A lawyer's or law firm's operating accounts should not be established as IOLTA accounts.

Trust Account Rules

The procedures and rules governing all lawyer trust accounts, including NC IOLTA accounts, are established by the North Carolina State Bar. Rules 1.15 of the Rules of Professional Conduct - Rule 1.15 – Safekeeping Property, Rule 1.15-1 – Definitions, Rule 1.15-2 – General Rules, and Rule 1.15-3 – Records and Accountings – pertain to the safekeeping of client funds in a trust account. For more information about the trust account rules, contact the NC State Bar at 919-828-4620 or refer to the Trust Account Handbook.

Opening NC IOLTA Accounts

Account Name

Although the tax identification number of NC IOLTA will be assigned to all general trust accounts, the trust account and all checks should bear the name assigned by the lawyer/law firm to the account. The trust account and all checks must be clearly labeled as a "trust account" or drawn on a trust account. Lawyers may use identifying names on their accounts and checks, such as Real Estate Trust Account, General Trust Account, etc. The identifying account name may include the term IOLTA; however, it should be clear that the NC IOLTA program is not the fiduciary agent for the account.

For example, an appropriate title for a general trust account might be "The Trust Account of John Smith, Attorney" or "Smith, Jones & Williams Real Estate Trust Account” or "Smith, Jones & Williams IOLTA Account."

Tax ID and 1099s

All NC IOLTA accounts must use NC IOLTA’s tax ID number. Please contact the NC IOLTA office for the tax ID number. The interest earned on these accounts should not be reported as income of the lawyer or law firm. NC IOLTA is tax-exempt so, when possible, please suppress the generation of form 1099. If a 1099 must be generated, please make sure the name associated with the tax ID number reads as follows: BOARD OF TTEES OF THE N CAROLINA ST BAR PL FOR INT ON LAWYERS TR ACCT. (This name should not appear on the trust account checks.)

Other Information

Rules governing lawyer conduct prohibit a lawyer from benefiting from funds held or managed on behalf of clients. See 27 NCAC 2 1.15-2(j).

No trust account, whether it is IOLTA or not, can be linked to an operating account to utilize the collected trust account balances to offset charges or fees attributable to operating accounts (see NC State Bar RPC 150).

Feel free to contact the NC IOLTA staff if you have any questions about opening an IOLTA account.

Remitting on NC IOLTA Accounts

Remittance

Interest should be remitted to NC IOLTA monthly. Payment on multiple accounts should be combined into one payment and payments should be remitted through the ABA Clearinghouse or wired. For ACH and wiring instructions, please contact the IOLTA office.

Reporting

The IOLTA Interest Remittance Report template is available and includes the following information that must be provided for each NC IOLTA account:

Account Name / Account Number / Gross Interest / Gross Service Charge / Net Interest / Interest Rate / Average Principal Balance / Earnings Period

Eligible NC financial institutions should use the remittance portal to upload their remittance reports or other documents. Contact NC IOLTA if the banks needs assistance with submitting remittance reports.

All open accounts must be included in the report even if no interest was earned or paid during the period. In addition, please note if an account has closed.

Service Charges

Eligible Banks may elect to waive any or all service charges on IOLTA accounts. If a bank does not waive service charges on IOLTA accounts, allowable reasonable service charges may be assessed but only against interest earned on the IOLTA account. Allowable reasonable service charges may be deducted from interest on an IOLTA account only at the rates and in accordance with the bank’s standard practice for comparable non-IOLTA accounts. Allowable reasonable service charges for IOLTA accounts are: (i) a reasonable account maintenance fee, (ii) per check charges, (iii) per deposit charges, (iv) a fee in lieu of a minimum balance, (v) federal deposit insurance fees, and (vi) automated transfer (Sweep) fees. No service charges in excess of the interest earned on the account for any month or quarter shall be deducted from interest earned on other IOLTA accounts or from the principal of the account.

All service charges other than allowable reasonable service charges assessed against an IOLTA Account are the responsibility of and must be paid by the lawyer or law firm. These charges may be deducted from the firm’s operating account, billed to the firm, or deducted from funds maintained or deposited by the lawyer in the IOLTA account for that purpose. Business costs or costs billable to others are the responsibility of the law firm and should not be charged against client funds in the account or against the interest or the earnings credit of an IOLTA account. Examples of such costs include but are not limited to check printing, NSF/OD fees, stop payment orders, wire transfer fees, account reconciliation, remote capture capability, online banking, digital imaging, CD Rom statements, or interest charged on uncollected balances (float). See NC IOLTA Rule .1316(e).