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Demystifying IOLTA: Navigating Interest on Client Trust Accounts

What is IOLTA and how does it work?

IOLTA stands for Interest on Client Trust Account, representing a specific type of Client Trust Account (CTA). Attorneys who receive advance fees or retainers from clients may be required to open an IOLTA bank account. It is a legal obligation for attorneys to keep their clients’ funds separate. IOLTA rules ensure that the interest generated on these accounts contributes to a broader social cause.

By law, attorneys are prohibited from earning interest on their clients’ funds. Instead, the interest accrued in IOLTA accounts is automatically directed to the respective state IOLTA board, such as the Maryland Legal Services Corporation in Maryland. These funds are then utilized to support charitable initiatives, educational programs, provide civil legal assistance to the underprivileged, and enhance the overall administration of justice.

Attorneys can only earn for what they have worked. For example, a Attorney receives a retainer fee of $12,000 which is then deposited into an IOLTA account. His hourly rate is $100 and he spends two hours working on the client’s case. He is required to move $200 of his billable hours from the trust account into a business account. So, the remaining $11,800 in the IOLTA account continues to earn interest. That interest supports various legal services for those in need.

Call Juris Ledger today if you have any questions about your Law Firm’s financials. You reach us at (410) 469-2450 or visit us at to set up an appointment.

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