Several federal banking changes passed in Congress back in 1980, and allow certain checking accounts to gain interest. The establishment of IOLTA enabled banks to take the earned interest on client trust funds and pass it on to the accounts that are a part of the state IOLTA program.
Keep reading to learn more about the impact of IOLTA funds in America.
Impact of IOLTA
These interest-bearing accounts pave the way for a myriad of community uses. Some of the ways a state IOLTA program uses the funding includes more than civil legal services. This money may help support the administration of justice, provide funding for legal aid for under-served and low-income residents, and contribute to law school scholarship programs.
That’s not all. The money created can even provide grants for non-profit organizations and public service programs. In Nevada, these programs include promoting access to justice for victims of domestic violence, to children in need of protection by a juvenile court, and providing direct legal services for those otherwise unable to afford it.
What to Know About IOLTA
Although it may be tempting, lawyers cannot withdraw fees from an IOLTA account before they’ve earned those fees. It’s not only illegal, but it’s an excellent way to get disbarred. Always keep your client and business accounts separate. An IOLTA account isn’t a savings account or an operating account. This money does not belong to you.
The same goes for how you record a trust deposit. The funds placed in your client’s accounts should remain your client's funds until you earn them. Record any and every transaction, no matter how seemingly insignificant, so you can show IOLTA and the state bar if requested. Make it a habit to avoid any potential trouble.
Support Nevada Residents
Every state varies as to whether this participation is mandatory. Across the U.S., IOLTA grants totaled over $175 million in 2020 alone, according to the American Bar. Those who do participate pay better rates than the market rate.
As of 2021, IOLTA in Nevada has provided 234,598 Nevada households with access to civil legal assistance. Not every financial institution participates in the Nevada IOLTA. Check with the bank where you opened your regular business account to see if it supports the IOLTA program.
Western Alliance Bank, for example, can support Nevada business clients with its unique services and vast experience. In 2018, the Bank of Nevada voluntarily increased the Annual Percentage Yield, or APY, that it paid on IOLTA funds to help increase the support for legal assistance programs. In 2022, the Bank of Nevada again committed to an increase in the APY due to hitting a new IOLTA deposit milestone.
Supporting the Community
Interest on Lawyer Trust Accounts is a simple way to raise money for charitable causes. Every state has different causes. When it comes to IOLTA accounts through Western Alliance Bank, all interest is earmarked for your state Bar Foundation, which handles the distribution of money to pro-bono legal assistance programs. There are no maintenance or monthly fees.
The Bottom Line
IOLTA grants can make a great impact. Check with your bank to make sure it's meeting all of your small business financial needs, from business checking accounts to specialized account types, like IOLTA.