ISBA backs unlimited coverage of IOLTA accounts

The Transaction Account Guarantee (TAG) Program, through which the FDIC provides unlimited deposit insurance coverage of client funds in IOLTA accounts at participating financial institutions is set to end on Dec. 31, 2010. The Illinois State Bar Association supports continuing unlimited coverage of IOLTA accounts for the following reasons:

• IOLTA accounts provide revenue for the states at no cost to clients. Lawyers often handle money that belongs to clients; however, the amount of money held for a single client is often quite small or held for only a short period of time, and cannot therefore earn interest for the client.  IOLTA accounts allow lawyers handling client funds that cannot earn net income for the client to place these funds in a single, pooled, interest-bearing trust account.  Banks in turn forward the interest earned on these accounts to the state IOLTA program, which uses the money to fund a variety of charitable causes.

• IOLTA programs provide funding critical to maintaining and improving access to the justice system in communities across the United States. IOLTA dollars go to support civil legal assistance for the poor, efforts to improve the administration of justice by our courts, initiatives to educate the public about legal issues, and scholarships and clinical instruction for law students.  All states benefit from IOLTA, and 41 states require lawyers to place client funds unable to earn interest for the client into an IOLTA account.
• IOLTA accounts need full FDIC coverage to protect client funds. Lawyers have a fiduciary duty to their clients.  Lawyers holding significant client funds must consider whether to continue to use IOLTA accounts as required by law in most states, or to place their client funds in a fully insured, non-interest-bearing deposit transaction account. If lawyers move their accounts, the interest income received by IOLTA programs, a significant source of funding for civil legal aid, would be severely reduced.

More information is available by clicking here. From the Lawyers Trust Fund of Illinois: The Transaction Account Guarantee (TAG) Program, through which the FDIC provides unlimited deposit insurance coverage of client funds in IOLTA accounts at participating financial institutions will continue through December 31, 2010. A number of financial institutions that participated in the original program opted out of the extension. Lawyers may visit www.fdic.gov/regulations/resources/TLGP/optout.html to see a list of banks that have opted out. Funds held in IOLTA accounts at financial institutions that opted out of the extension are subject to to the standard limit of $250,000 per client. That coverage limit has been made permanent. To learn more about the extension and the TAG Program, go to the FDIC’s web site at www.fdic.gov/regulations/resources/TLGP/.