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The Alabama Law Foundation IOLTA Rule Amendments - Rule 1.15 Alabama Rules Of Professional Conduct

See IOLTA Revised Rules (PDF)

IOLTA Questions and Answers

On September 27, 2007, the Supreme Court of Alabama amended Rule 1.15 of the Alabama Rules of Professional Conduct, which governs safekeeping of property by attorneys.  The rule change is effective January 1, 2008.

Attorneys routinely receive funds to be held in trust for future use.  If a client’s funds are large enough or to be held long enough to generate interest for the client, net of bank charges and administrative fees, they should be placed in an interest-bearing account for the individual client's benefit.  Client funds that are too small in amount or held for too short a period of time to earn interest for the client, net of bank charges and administrative fees, are commingled in a pooled checking account. 

The preamble to the Alabama Rules of Professional Conduct states that "a lawyer is a representative of clients, an officer of the legal system and a public citizen having special responsibility for the quality of justice;" and further that "A lawyer should be mindful of deficiencies in the administration of justice and of the fact that the poor, and sometimes persons who are not poor, cannot afford adequate legal assistance, and should therefore devote professional time and civic influence in their behalf."

The Alabama Law Foundation IOLTA program, authorized by the Supreme Court of Alabama on May 5, 1987, which allows attorneys to convert their noninterest-bearing trust accounts to interest-bearing IOLTA accounts is one way lawyers have to provide access to justice for the poor.  The interest from these IOLTA accounts is remitted at least quarterly to the Alabama Law Foundation, Inc., a charitable, tax-exempt entity, which was established by the Alabama State Bar in 1987 as its charitable arm. 

What does the new IOLTA rule do?
What is the purpose of the rule amendments?
Do other states have mandatory IOLTA programs?
If I already maintain an IOLTA account does the rule change affect me?
What if I do not have a commingled non interest-bearing client trust account?
Will attorneys or law firms have to move their IOLTA accounts to institutions paying higher rates?
Is this voluntary for attorneys and law firms?
Are attorneys and law firms responsible for monitoring their institution’s compliance with the interest or dividend requirement of the rule?
How does the Alabama Law Foundation use the interest?
What is the process to participate in the Alabama Law Foundation IOLTA program?

What does the new IOLTA rule do?

  • Makes participation in IOLTA by lawyers and/or law firms mandatory.
  • Defines institutions eligible to hold IOLTA accounts as only those institutions which pay IOLTA account customers the highest interest rate or dividend generally available at their own institution to similarly situated non-IOLTA customers.

What is the purpose of the rule amendments?

To increase revenue for the charitable purposes of the IOLTA program established by the Supreme Court of Alabama:

  • Legal assistance for the poor
  • Improvements in the administration of justice
  • Law-related education for the public

Do other states have mandatory IOLTA programs?

Thirty-four other states have mandatory IOLTA programs.

If I already maintain an IOLTA account does the rule change affect me?

You will maintain your IOLTA account as you always have.  However, if you have more than one commingled client trust account all must now be IOLTA accounts.  All attorneys will also certify trust accounts to the Secretary of the Alabama State Bar on an annual basis.  Information regarding the certification process will be sent at a later date.

What if I do not have a commingled non interest-bearing client trust account?

Lawyers who do not hold client funds in trust are exempt from the provisions of this Rule. Those lawyers will simply signify this on their annual certification form.

Will attorneys or law firms have to move their IOLTA accounts to institutions paying higher rates?

No.  The rule only requires institutions to pay IOLTA accounts the highest interest rate or dividend generally available to similarly-situated non-IOLTA account customers at their own institution.

Is this voluntary for attorneys and law firms?

No.  The new rule requires attorneys and law firms to maintain their IOLTA account only at eligible banks, savings & loan associations or investment companies which comply with the interest or dividend requirement of the new rule.

Are attorneys and law firms responsible for monitoring their institution’s compliance with the interest or dividend requirement of the rule?

No.  The Foundation is.

How does the Alabama Law Foundation use the interest?

Since the first grants of IOLTA funds were awarded in 1989, the Alabama Law Foundation has awarded over $13 million for charitable, law related purposes.  The existence of IOLTA has allowed us to make progress in meeting the needs of the poor for civil legal aid through funding of pro bono projects and Legal Services.  The foundation has also funded projects to improve the administration of justice and to provide law related education for the public.  80% of IOLTA funds will be going to groups that provide legal assistance to the poor in civil cases.  Alabama ranks 51st in the country in civil legal aid funding per poor person.  This places our state behind even Puerto Rico.  Increased IOLTA revenue will allow the foundation to help close the gap.

What is the process to participate in the Alabama Law Foundation IOLTA program?

Attorneys wishing to participate in the program need to complete an IOLTA account form, which is available at the foundation’s web site www.alfinc.org.  Send a copy to your financial institution, keep one copy for your files and send the third copy to the Alabama Law Foundation to notify us of your plans to participate.  For more information contact the foundation at (800) 354-6154 or (334) 269-1515, or e-mail Tracy Daniel.

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