INTEREST ON LAWYERS TRUST ACCOUNT
A system in which lawyers place certain client deposits in interest-bearing accounts, with the interest then used to fund programs, such as legal service organizations who provide services to clients in need.
Originating in Canada and Australia in the
1960s, interest on lawyers trust account (IOLTA)
programs made their first appearance in the
United States in Florida in 1981. Since then, all
50 states and the District of Columbia have
established IOLTA programs. The concept is
straightforward. Lawyers routinely place large
client deposits—such as escrow accounts—in
interest-bearing accounts, with the interest to be
paid to the client. Deposits that would individu-
ally be too small or too short-term to generate
interest are pooled into IOLTA accounts. The
interest generated by these funds is then used to
fund a variety of public legal services, usually
geared toward those who cannot afford lawyers.
Nationwide, IOLTA programs earned more than
$200 million in interest in 2002.
Over the years IOLTA programs faced chal-
lenges from individuals and lawyers who felt
that the interest, however small the amount,
belonged to the clients. They cited the Fifth
Amendment’s prohibition against the taking of
private property without just compensation.
IOLTA proponents countered that, since the
deposits individually would yield no interest, the
clients were not actually losing money. The U.S.
Supreme Court weighed in on March 26, 2003,
when it narrowly decided in favor of IOLTAs
(Brown v. Legal Foundation of Washington, U.S.
Supreme Court, 01-1325, 2003). The Court
found that the Fifth Amendment’s Just Com-
pensation Clause did not apply because without
the existence of the IOLTA accounts no other
depository accounts would exist, and conse-
quently the clients whose money was being held
