Interest on Lawyers Trust Accounts Program

The New Hampshire Supreme Court adopted Rule 50 in 1982 to establish the Interest on Lawyers Trust Accounts (IOLTA) Program in New Hampshire. Through IOLTA, interest earned on lawyers’ trust accounts that are either too nominal or held for too short a time period to warrant establishment of a separate client account, is forwarded to the New Hampshire Bar Foundation to be used for charitable purposes. Attorney participation in IOLTA supports the statewide IOLTA Grants Program. IOLTA grants fund nonprofit organizations that provide free or reduced-fee civil legal services to our most disadvantaged residents, and/or educational programs about the law and the courts.

Currently, over forty financial institutions participate in the NH IOLTA program. Many banks and credit unions are at the Leadership and Partner levels by offering 1% to 2% on IOLTA accounts and waive routine service charges.

What is IOLTA?
In 1982, the New Hampshire Supreme Court adopted Rule 50 that requires attorneys to “create or maintain an interest-bearing trust account for clients’ funds which are nominal in amount or to be held for a short period of time.” Under Rule 50, the interest generated in these accounts must be transferred to the New Hampshire Bar Foundation for charitable purposes. The New Hampshire IOLTA program became the second IOLTA program to operate in the United States. Now all 50 states, as well as the Canadian provinces, have IOLTA programs. IOLTA programs generated $133.8 million in 2003. From 1991 to 2003, IOLTA programs generated more than $1.5 billion nationwide.

What is an IOLTA account?
An IOLTA account is an interest bearing demand account, usually a NOW account, set up by an attorney naming the New Hampshire Bar Foundation as the recipient of interest.

What funds get deposited in an IOLTA account?
Client funds that are not expected to generate interest above and beyond the costs associated with opening a separate account should be pooled in an IOLTA account. Conversely, client funds that can be expected to generate net income for the client should not be deposited in an IOLTA account. Attorneys need to use their own discretion. Factors to consider include fees and interest rates on standard NOW accounts, cost of staff time and law firm expense, amount of the deposit and time it will be held.

Are all attorneys required to participate in IOLTA?
All attorneys are required to participate in IOLTA unless exempt from this requirement pursuant to Rule 50(1)(F).

What is the Rule 50 certification requirement?
The Rule 50 certification requirement is stated in Rule 50-A. A prescribed Trust Accounting Certificate of Compliance form will be sent to each attorney annually by the NH Bar Association with the attorney’s annual dues and court fees assessment. The completed Trust Accounting Certificate of Compliance form shall be filed with the NH Supreme Court by delivery to the NH Bar Association by August 1st of each year. Failure to file in a timely manner may result in various fines and sanctions.

How do I establish an IOLTA account?
IOLTA accounts are established with the Authorization to Financial Institutions form or through the Bar Foundation. Take the form to the financial institution when opening your account. The form authorizes the financial institution to enroll your new account in the IOLTA Program; to forward earned interest to the Bar Foundation on a monthly basis; and to name the New Hampshire Bar Foundation, taxpayer identification number (02-0333762), as the recipient of interest. A copy of the form with new account information should be faxed to 603-224-2910 or mailed to the New Hampshire Bar Foundation, 2 Pillsbury Street, Suite 300, Concord, NH 03301.

Do some institutions pay higher interest on IOLTA accounts? A number of banks and credit unions support the mission of the Foundation by offering above-market interest rates on IOLTA accounts, boosting funding for vitally needed civil legal services. List of Leadership and Partner institutions.

Are there tax consequences due to IOLTA participation?
No. The tax identification number for all IOLTA accounts is that of the Foundation, a 501(c)(3) charitable organization. All IOLTA accounts are exempt from backup withholding because of the Foundation’s tax-exempt status. Further, the IRS does not require that a 1099 be generated on IOLTA accounts. If a 1099 is generated, it should reflect the TIN of the New Hampshire Bar Foundation.

Questions about IOLTA? Contact Email us.

Bellwether Community Credit Union is pleased to join the IOLTA program at the Leadership Level and to support the NH Bar Foundation. This is a new opportunity for New Hampshire credit unions and one that we were excited to establish. We look forward to a long standing partnership with the NH Bar Foundation to benefit local organizations through the IOLTA Grants Program.”

– Michael A. L’Ecuyer, President/CEO
Bellwether Community Credit Union

Michael A. L'Ecuyer, President/CEO, Bellwether Community Credit Union