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Bar News - December 17, 2010

IOLTA Likely to Become Mandatory in 2011

The NH Supreme Court is expected to approve a rule proposed by the NH Access to Justice Commission to convert the current opt-out provision for participation in the Interest on Lawyers Trust Accounts (IOLTA) program to mandatory participation for attorneys who hold client funds.

If approved, NH would join 40 other states where IOLTA is mandatory. Although NHs voluntary participation in IOLTA is high, Justice James E. Duggan, co-chair of the Access to Justice Commission, has championed this change to enhance critically needed funding for civil legal service programs. It is anticipated that the rule will go into effect for spring 2011.

Watch the e-bulletin or for updates and a guide to creating IOLTA accounts which will be posted and updated if the Court enacts a mandatory IOLTA rule. It is anticipated that law firms would be required to demonstrate participation in IOLTA by June of 2011.

NHSC Rule 50(1) was adopted in 1982, making NHs IOLTA program the second to become operational in the U.S. Now all 50 states, as well as Canadian provinces, have IOLTA programs. With IOLTA, client funds that are not expected to generate interest above and beyond the costs associated with opening a separate account are "pooled" in an interest-bearing account. The interest on such "pooled" accounts is forwarded to the NH Bar Foundation for the charitable purposes specified in the Court order establishing the rule.

IOLTA revenue funds two of NHs major sources of civil legal aid: NH Legal Assistance and the NHBA Pro Bono Referral Program. Critical community services are made possible by the estimated 90 percent of eligible New Hampshire lawyers who voluntarily participate in the IOLTA program. Also crucial to the success of IOLTA is the participation of many NH banks, including those designated as "Leadership Banks" which provide 2 percent interest on IOLTA accounts.

The impetus for the proposal to convert to a mandatory program came from the NH Access to Justice Commission following steep drops in IOLTA revenue since 2009. The economic decline, combined with falling interest rates, led to a sharp drop in interest revenue for IOLTA. To assist in consideration of the proposal, the NHBA conducted a survey of members soliciting their opinions on mandatory IOLTA, and the results were provided to the Court.

The NH Bar Foundation, which administers IOLTA, awarded $900,000 in grants to non-profit organizations in the current fiscal year 2011, compared to $1.7 million in fiscal year 2008. While IOLTA revenue has been falling, the recession has heightened the need for civil legal services for low-income households.

"We need to reach out to every available resource to help low-income citizens who need legal assistance to make it through these tough economic times," said Duggan, in a news release issued last spring when the Court first announced its interest in enacting the mandatory IOLTA rule. The Court requested comments on the proposal during a recent comment period on a body of rule changes.

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