Frequently Asked Questions for Lawyers
The Trust Account Handbook published by the NC State Bar explains all trust account practices and policies.
If you cannot find the answer you need using the Trust Account Handbook, a number of staff people in different departments at the NC State Bar may be able to assist with your trust account question.
Questions about trust accounts generally fall into one of these categories:
- For questions regarding client records, disbursement guidelines, client communication, and other trust account practices, contact the ethics department at 919-828-4620 ext. 575 or email@example.com.
- For questions regarding trust account reconciliations, contact Anne Parkin at 919-828-4620 ext. 259.
- For questions, explanations, or issues regarding a NSF (non-sufficient funds) notification, contact Joe Commisso 919-828-4620 ext. 200 or Sonja Puryear at 919-828-4620 ext. 203.
- For questions regarding IOLTA compliance such as how to establish or close an IOLTA account or certify as to compliance, contact Bethany Farrelly, Shannon Azzi, Claire Mills, or Mary Irvine at 919-828-0477.
All active members of the North Carolina State Bar who maintain general client trust accounts in North Carolina must ensure that all their general client trust accounts are established as interest-bearing IOLTA accounts. Lawyers must certify annually when paying their NC State Bar Dues—either on the Dues Notice form or electronically—that all general client trust accounts maintained by the lawyer/law firm are IOLTA accounts. Lawyers must be in compliance with this requirement no later than June 30.
On the annual State Bar dues notice form or electronically via the State Bar website, each active member of the State Bar must annually certify either (1) that all of the lawyer’s and/or firm’s general client trust accounts for North Carolina client funds are established as North Carolina IOLTA Accounts or (2) that neither the lawyer nor their employer maintain any general trust accounts holding North Carolina client funds.
Lawyers must be in compliance with this requirement no later than June 30 of each calendar year. A lawyer who fails to comply with all administrative requirements of the NC IOLTA Rules—including the annual certification—shall be reported to the NC State Bar’s Administrative Committee, which may initiate proceedings to suspend administratively the lawyer’s active membership status and eligibility to practice law.
Lawyers must inform NC IOLTA when opening or closing IOLTA accounts. The NC IOLTA Status Update Form should be used for this purpose. It should also be used to report employment or address changes.
As of July 1, 2010, lawyers may hold IOLTA accounts only at “eligible” banks that agree to pay IOLTA accounts the highest rate available to that bank’s other customers when the IOLTA accounts meet the same minimum balance or other account qualifications. NC IOLTA maintains a list of eligible banks.
Some banks have agreed to go above and beyond the requirements to support the NC IOLTA program in its mission to ensure that low-income North Carolinians have access to critically needed legal aid. Prime Partners are banks that pay a net yield of 75% of the Federal Funds target rate or 0.75%, whichever is higher. These banks are specially recognized on the Eligible Bank list.
Many banks waive service charges on IOLTA accounts. Banks that waive service charges are noted on the list.
If you would like to have more information about IOLTA policies or accounts at a particular bank, you may call the NC IOLTA office at 919-828-0477.
A list of North Carolina banks eligible to hold IOLTA accounts is maintained by NC IOLTA. If you wish to establish an IOLTA account at a bank that is not listed, please have the bank contact the IOLTA office at 919-828-0477.
Rule 1.15-2(l) requires lawyers to file a bank directive with the financial institution for every trust account, whether it is a general trust account, designated trust account or fiduciary trust account.
No other forms are required by NC IOLTA to open the account as an IOLTA account. However, the NC IOLTA Status Update Form should be submitted to IOLTA once the account has been opened.
A trust account must be clearly labeled as a “trust account” and the name of the account should clearly identify the lawyer/firm — not NC IOLTA — as the fiduciary agent for the account. Lawyers/firms may use identifying names on their accounts such as Real Estate Trust Account, General Trust Account, IOLTA Trust Account, etc.
All general client trust accounts must be established and maintained as interest-bearing IOLTA accounts, interest from which is remitted to NC IOLTA at the State Bar. General client trust accounts are those accounts that hold nominal and short-term deposits of client funds. Lawyers retain discretion to determine whether a trust deposit is of sufficient size or duration to justify placement in a separate (dedicated) interest-bearing account for the benefit of single client or transaction.
IOLTA accounts are subject to all trust account requirements established by the North Carolina State Bar Rules of Professional Conduct. For additional information about trust account requirements, see Trust Accounting Questions and Answers and Rules 1.15 thru 1.15-3 of the Rules of Professional Conduct.
You may also visit the State Bar's website and download the Trust Account Handbook.
No. Trust moneys of the type placed in IOLTA accounts (nominal in amount or expected to be held for a short duration) have traditionally been deposited in lawyers' pooled trust accounts. Prior to the IOLTA program, such accounts did not earn interest. The North Carolina State Bar now requires general trust accounts to earn interest, which is remitted to NC IOLTA for funding law-related charitable purposes.
Of course, lawyers still retain discretion to determine whether a trust deposit is of sufficient size or duration to justify placement in a separate (dedicated) interest-bearing account for the benefit of the client or a single transaction.
Should funds be placed into a general client trust account in error, NC IOLTA has policies and procedures through which the amount of interest erroneously remitted is refunded.
According to the Internal Revenue Service, maintaining IOLTA accounts imposes no tax consequences to the client or the lawyer. See Revenue Ruling 81-209. Each IOLTA account bears the tax identification number of the NC IOLTA Board of Trustees to ensure that all accumulated interest is reported as income of the IOLTA program. IOLTA’s tax id number and related name, Board of TTEES of The N Carolina St Bar Pl For Int On Lawyers Tr Acct, are for purposes of interest reporting only and should not appear on the checks or deposits slips. If your bank needs IOLTA's tax id number or other assistance, please contact the IOLTA office at 919-828-0477.
In 1988, the North Carolina Supreme Court approved the posting of a Client Notice Certificate to inform clients about the IOLTA program. NC IOLTA provides Client Notices to attorneys at no charge.
Under the Rules of Professional Conduct, North Carolina lawyers must maintain all general trust accounts holding North Carolina client funds at a bank in North Carolina or a bank with branch offices in North Carolina. As Comment  to Rule 1.15 notes, a law firm with offices in another state may send a North Carolina client’s funds to a firm office in another state for centralized processing; however, the client funds are still subject to the requirements of the NC Rules of Professional Conduct. Therefore, the North Carolina client’s funds should be placed into a general trust account established in North Carolina, the interest from which will be remitted to NC IOLTA.
NC IOLTA pays routine service charges on IOLTA accounts. Some banks waive service charges on IOLTA accounts. It is permissible for banks that do not waive service charges on IOLTA accounts to deduct from interest or utilize earnings credit for routine service charges associated with the account. Routine service charges include monthly account maintenance charges, per item check or deposit charges, etc.
Business costs or costs billable to others are the responsibility of the law firm and should not be charged against client funds in the IOLTA account or against the interest or the earnings credit of an IOLTA account. 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. 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, on-line banking, digital imaging, CD Rom statements, or interest charged on uncollected balances (float).
The North Carolina State Bar and the North Carolina Supreme Court allow IOLTA funds to be used, after administrative expenses, to fund grants under the following four categories:
- providing civil legal aid to indigents;
- enhancement and improvement of grievance and disciplinary procedures for lawyers;
- development and maintenance of a fund for student loans for legal education on the basis of need; and
- 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.
IOLTA funds are not used for the Client Security Fund which reimburses clients who have suffered financial loss as the result of dishonest conduct of lawyers engaged in the private practice of law in North Carolina.
IOLTA administrative costs are paid from program income and are under ten percent of income since its inception.
Grant decisions are made annually by the NC IOLTA Board of Trustees, who administer the program according to the rules promulgated by the NC State Bar Council and approved by the NC Supreme Court. 27 NCAC 1D .1301-21 The board is a standing committee of the NC State Bar Council, the representative governing body of the State Bar, whose members are elected by the bar membership through the judicial districts. IOLTA trustees are appointed by the NC State Bar Council. NC IOLTA grants are for the calendar year, and all grant applications are reviewed annually by all the trustees.
A current list of members of the IOLTA Board of Trustees, along with a list of past board members, can be found here.
For more information about NC IOLTA, please contact our office.
Shannon Azzi, Accounts Data Assistant
Bethany Farrelly, Program Assistant
Claire Mills, Accounts Manager
Mary Irvine, Executive Director
217 E. Edenton Street
Raleigh, North Carolina 27601
PO Box 25996
Raleigh, North Carolina 27611-5996
(919) 821-9168 Fax