Client trust accounts update
Lawyers who have client trust (IOLTA) accounts were exposed to personal liability for a bank’s failure. The argument went something like this: The lawyer selects the bank into which the funds of a client are deposited. The funds could come from advanced fee payments, settlement amounts or trial victories. If the amounts for the benefit of a client, coupled with the funds of a client in the same bank, exceed $100,000, the balance above that amount is not FDIC protected. If not protected and lost because the bank fails, the lawyer as the principal in selecting the bank is strictly and personally liable to the client for the loss.
Then, Congress altered the cap for protection. The amount was raised to $250,000. Within the last seven days, the FDIC gave lawyers, and their clients, even more protection. All amounts in a clients IOLTA trust account are protected, regardless of the amount. The account must be identified as an IOLTA account and the lawyer must maintain his/her clients trust account in accordance with generally accepted accounting principles and the trust rules of the jurisdiction for such accounts, including identification of the amounts held for each client.
Phew! At first, it appeared that lawyers would be required to inspect the financial solvency of their banks and vouch for their stability. With so many failures, that would have been a huge task. Lawyers can now go back to doing what they’re licensed to do … practice law! And the bar associations with IOLTA bank treaties can continue to distribute funds to legal aid organizations.Tags: Cash Flow - Finances
Categorized in: Cash Flow - Finances