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IOLTA – For Lawyers
What is IOLTA?
In 1982, the New Hampshire Supreme Court adopted Rule 50 that requires attorneys to “create or maintain an interest-bearing trust account for clients’ funds which are nominal in amount or to be held for a short period of time.” Under Rule 50, the interest generated in these accounts must be transferred to the New Hampshire Bar Foundation for charitable purposes. The New Hampshire IOLTA program became the second IOLTA program to operate in the United States. Now all 50 states, the District of Columbia, U.S. Virgin Islands, Puerto Rico as well as the Canadian provinces, have IOLTA programs. The New Hampshire IOLTA Program has generated over $36 million for civil legal services and civics education in our state since 1982.
What is an IOLTA account?
An IOLTA account is an interest-bearing demand account, usually a NOW account, set up by an attorney using the Bar Foundation’s Federal ID #.
What funds get deposited in an IOLTA account?
Client funds that are not expected to generate interest above and beyond the costs associated with opening a separate account should be pooled in an IOLTA account. Conversely, client funds that can be expected to generate net income for the client should not be deposited in an IOLTA account. Attorneys need to use their own discretion. Factors to consider include fees and interest rates on standard NOW accounts, cost of staff time and law firm expense, amount of the deposit and time it will be held.
Are all attorneys required to participate in IOLTA?
All attorneys are required to participate in IOLTA unless exempt from this requirement pursuant to Rule 50(1)(F).
What is the Rule 50 certification requirement?
The Rule 50 certification requirement is stated in Rule 50-A. A prescribed Trust Accounting Certificate of Compliance form will be sent to each attorney annually by the NH Bar Association with the attorney’s annual dues and court fees assessment. The completed Trust Accounting Certificate of Compliance form shall be filed with the NH Supreme Court by delivery to the NH Bar Association each year. Failure to file in a timely manner may result in various fines and sanctions. Go to www.NHBar.org for more details on Trust Account Compliance Certification.
How do I establish an IOLTA account?
IOLTA accounts are established with the Authorization to Financial Institutions form. Take the form to the financial institution when opening your account. The form authorizes the financial institution to enroll your new account in the IOLTA Program; to forward earned interest to the Bar Foundation on a monthly basis; to notify the Attorney Discipline Office of any negative balances and to name the New Hampshire Bar Foundation, taxpayer identification number (02-0333762), as the recipient of interest. A copy of the form with new account information should be mailed to the New Hampshire Bar Foundation, 2 Pillsbury Street, Suite 300, Concord, NH 03301, or emailed to info@nhbarfoundation.org.
Do some institutions pay higher interest on IOLTA accounts? A number of banks and credit unions support the mission of the Foundation by offering above-market interest rates on IOLTA accounts, boosting funding for vitally needed civil legal services. List of Leadership and Partner institutions.
Are there tax consequences due to IOLTA participation?
No. The tax identification number for all IOLTA accounts is that of the Foundation, a 501(c)(3) charitable organization. All IOLTA accounts are exempt from backup withholding because of the Foundation’s tax-exempt status. Further, the IRS does not require that a 1099 be generated on IOLTA accounts. If a 1099 is generated, it should reflect the TIN of the New Hampshire Bar Foundation.
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