The Ins and Outs of IOLTA

By Kristyn Connors

As a law firm administrator, the beginning of each calendar year brings as many opportunities as it does responsibilities.  January turns over a new leaf in more ways than one, and if your firm is anything like mine, we can never be too sure what that leaf might uncover.  What you can be positive of, however, is that you will need to complete plenty of annual tasks that, albeit mundane, are vital to the continued success and legal compliance of your law firm.  One of these tasks is registering your firm’s attorneys and trust accounts with IOLTA, or Interest on Lawyers Trust Accounts.

While handled differently state-by-state, each state and the District of Columbia administers an IOLTA program to keep each client’s funds separate from the business’s operating accounts and each other.  Monies that belong in a trust account include both funds paid in advance to an attorney for work yet to be completed, as well as money that may be due to a third party.  

In New Jersey, any attorney admitted to the Bar must retain an attorney trust account, and must comply with the IOLTA rule, regardless of whether they are a sole practitioner or a member of a partnership or corporation.  This account (sometimes, multiple accounts) must be in the name of either the attorney themselves or the partnership or corporation of which the attorney is a member or by which they are employed.  Each account then may have separate sub-accounts so that clients’ funds aren’t intermingled, assuming a separate account isn’t opened for each client matter.  There are very strict recordkeeping requirements for these accounts and sub-accounts, so it is important that the firm’s accounting department be well-trained to avoid any issues.  (A manual is available from the Office of Attorney Ethics.)

IOLTA trust accounts are typically utilized when the anticipated interest on client fund deposits will not exceed $150.00.  (If the interest is expected to be greater than $150.00, the funds should be placed in a separate account that bears interest for the benefit of the client.)  While this $150.00 is not a strict limit, it is a standard that is followed by most attorneys in the State of New Jersey.  The small amount of interest earned on these limited funds is kept by the IOLTA Fund, and disbursed to various non-profit and service programs throughout the state.

The actual IOLTA registration process is multifaceted.  What follows is a step-by-step explanation:

  1. Either a new, non-interest-bearing account can be created to hold the above-referenced client funds, or an existing non-interest-bearing trust account can be converted to an IOLTA account.

  1. A registration form is available on for you to register each account that will need to be designated as an IOLTA account that has not yet been registered as same.  You will need to provide the bank’s name and address and attorney/firm name and address, as well as the account name and number.  (This needs to be done each time an account is added or converted.)  If more than one attorney will be using the account(s), you will also need to provide a list of any attorney authorized as a signatory, and the form should be signed by a managing partner.  If the account will be used by only one attorney, that attorney should sign the form themselves.

  1. Once the trust account is registered with the state, you will need to re-confirm its active IOLTA status with the IOLTA Fund annually using a registration form that is mailed to all law firms every December (the form is also available on the Fund’s website).  If your firm has more accounts than the form allows, a rider needs to be added with the additional information, so that all accounts are sent in to the IOLTA Fund together.  The completed form, along with any addendums, is due in early February each year.  

  1. Any account that holds a balance of less than $2,500.00 needs to be marked accordingly on the registration form, so that the IOLTA Fund knows not to convert this account into an interest-bearing account (as it does not meet the threshold).  Should a low balance account’s status change at any point, causing the balance of the account to exceed $2,500.00, the IOLTA Fund needs to be notified immediately.

  1. Along with the registration form(s), you will also need to send the IOLTA Fund a roster of your active attorneys that will be using all accounts that you are registering.  Should a new attorney join your firm mid-year, the IOLTA Fund must be notified.

  1. While unrelated to IOLTA directly, when attorneys submit their annual registrations, you need to make sure that they are designating the correct attorney trust account on their registration forms, so that the entire trust account process flows smoothly, and all records are copasetic.

While seemingly cumbersome, registering with IOLTA each year is a necessary task that can be completed from start to finish in less than an hour or two with some persistence.  The hardest part on my end is confirming our active accounts with our two accounting departments, but I’m sure we all have our own roadblocks while completing even the simplest tasks.

Kristyn Connors is the Director of Administration at Fein, Such, Kahn & Shepard, P.C. in Parsippany, New Jersey.

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