What an IOLTA account is, and the rules that come with one

What IOLTA means

IOLTA stands for Interest on Lawyers’ Trust Accounts. An IOLTA account is a trust account at a bank, opened by a lawyer or firm, that holds money belonging to clients and third persons. It is pooled: one account holds many clients’ money at once, and the firm’s books show how much of the total belongs to each client.

What makes it an IOLTA account rather than an ordinary trust account is where the interest goes. The bank pays it to the state’s IOLTA program, not to the lawyer and not to the clients. According to the ABA Commission on IOLTA, IOLTA programs now operate in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands, and most of what they raise funds civil legal aid and pro bono programs.

Why the interest goes to legal aid

Lawyers have always held client money: a retainer for work not yet done, a settlement check waiting to be split, a filing fee the client sent ahead. When the amount is large or will sit for a long time, it can earn real interest for the client in an account of its own. Much of the time, though, the amount is small or the money will only be there for days or weeks. Interest on it would not cover the cost of collecting the interest.

The ABA’s overview explains the history. Lawyers kept these small, short-term deposits together in pooled trust accounts, and for decades those accounts earned nothing, partly because checking accounts did not pay interest until the early 1980s and partly because a lawyer may not profit from money that belongs to clients. After federal banking law changed in 1980, states created IOLTA programs: the pooled account earns interest, and the bank forwards it to a charitable program. The client loses nothing, because these are funds that could not have earned net interest for the client anyway.

Which money goes into IOLTA, and which does not

The test is whether the money could earn interest for the client after costs. The wording varies by state.

• California. Business and Professions Code section 6211(a) requires a lawyer who receives or disburses trust funds to keep an IOLTA account for client funds that are “nominal in amount” or held “for a short period of time.” Section 6211(b) leaves room for separate interest-bearing trust accounts, with the interest payable to clients, for funds that do not fit that test. The State Bar’s FAQ puts it plainly: large amounts, or money held for a long time, go in an individual interest-bearing account for the benefit of the client.
• Florida. Rule 5-1.1(g) defines nominal or short-term funds as funds that cannot earn income for the client in excess of the costs to secure it. The lawyer decides in good faith when the money arrives, considering the amount, how long it will be held, the likelihood of delay in the matter, the cost of a separate account, and the bank’s minimum balance rules and fees. Under Rule 5-1.1(h), a lawyer holding funds that are not nominal or short-term may not benefit from the interest.
• Texas. The Texas Access to Justice Foundation’s FAQ says client funds that do not meet the nominal or short-term requirement should go in a separate account that earns interest for that client, under the client’s tax identification number rather than the Foundation’s.

A firm can therefore have one IOLTA account and, now and then, a separate trust account for a single client’s large or long-held funds, such as settlement proceeds held for months pending a lien dispute.

How an IOLTA account differs from an operating account

The two accounts must stay apart. Money that has become the firm’s moves from trust to operating. Money that belongs to a client never moves the other way to cover a firm expense.

What you may and may not do

ABA Model Rule 1.15 sets the baseline most states follow in some form.

• Keep client money separate. Client and third-person funds go in a separate account, maintained in the state where your office is, or elsewhere with the client’s consent (Rule 1.15(a)).
• No commingling, with one narrow exception. You may put your own money in the trust account only to pay bank service charges on it, and only as much as that requires (Rule 1.15(b)). The comment adds that you must keep accurate records of which part is yours. Florida also lets a lawyer deposit personal funds to replace a shortage, but requires immediate notice to the bar of the shortage, its cause and the amount replaced (Rule 5-1.1(a)(1)(B)).
• Advance fees go in trust. Fees and expenses paid in advance are deposited in trust and withdrawn only as fees are earned or expenses incurred (Rule 1.15(c)). Some states treat certain flat fees differently; see earned vs unearned fees.
• Do not pay firm or personal bills from trust. Move the earned fee to operating first, then pay the bill from operating.
• Spend a client’s money only for that client. Florida’s Rule 5-1.1(b) says money entrusted for a specific purpose must be applied only to that purpose. In practice, a payment for one client can only come from that client’s own balance, never from the pool.
• Tell the client and pay promptly. When money arrives in which a client or third person has an interest, notify them promptly, deliver what they are entitled to, and give a full accounting on request (Rule 1.15(d)).
• Hold disputed money in trust. If you and the client disagree about a fee, the disputed part stays in trust and the undisputed part is paid out promptly (Rule 1.15(e) and Comment 3).
• No cash withdrawals. The ABA Model Rules on Client Trust Account Records say withdrawals should be made only by check to a named payee, not to cash, or by authorized electronic transfer, and that only an admitted lawyer or someone under that lawyer’s direct supervision should sign or authorize transfers. Florida’s Rule 5-1.2(e) limits electronic transfers from trust to payments to or for a client, expenses incurred for a client, undisputed earned fees and transfers between trust accounts.

Records you are expected to keep

Model Rule 1.15(a) asks for complete records, preserved for a period after the representation ends; the model rule says five years in brackets, which means each state picks its own number. California’s standard is five years from final distribution of the funds. Florida’s is six years after the representation ends.

The ABA Model Rules on Client Trust Account Records list what those records usually are:

• a receipts and disbursements journal for the account
• a ledger for each client showing every deposit, payment and the balance
• fee agreements, bills and accountings to clients
• bank statements, deposit records and cancelled checks, or their electronic equivalents
• records of every electronic transfer, including who authorized it
• regular trial balances and reconciliations

The reconciliation is where most firms find their errors. It compares the bank, the account journal and the client ledgers, and it gets its own guide: three-way reconciliation.

Opening and reporting

States differ on paperwork as well as rules. Florida requires lawyers to notify The Florida Bar Foundation when an IOTA account is opened, with the account number, bank and Bar numbers, and to certify compliance every year. California requires every lawyer to report each year whether they held a client trust account. Texas asks attorneys to send the Foundation a notice form when they open an account. Banks that offer these accounts usually know their state’s program and its forms, so ask for an IOLTA account by name when you open one.

Rules differ by state

This guide uses the ABA Model Rules and three states as examples. Your own state may differ on how long records are kept, how often you must reconcile, whether some advance fees can go into operating, whether the bank must report an overdraft to the bar, and what you file each year. Read your state’s version of Rule 1.15 and its IOLTA program’s pages before you open the account.

How Coil handles this

Coil is the ledger, not the bank: your IOLTA account stays where it is. Coil keeps a ledger for every client and matter inside the account, refuses any disbursement that would take a client below zero, holds back deposits dated in the future from the spendable balance, and runs a three-way reconciliation that lists each uncleared item. Reconciled periods are locked, and the full trust ledger exports to CSV whenever your bar or accountant asks. See trust accounting software for the detail.

Last checked October 28, 2026. This is general information, not legal advice. Rules differ by state and change; check your own bar’s rules before relying on it.