Banking

What Is an IOLTA Account?

Nov 13, 2025

When managing client funds, attorneys must determine whether the funds are substantial enough or expected to be held long enough to justify a separate Client Trust Account (CTA).  

In cases where the funds are nominal in amount or held for a short duration, ethical rules require those funds to be deposited into an Interest on Lawyers’ Trust Account (IOLTA). This approach protects client money, maintains compliance with trust accounting rules and ensures that any interest generated supports state-administered legal aid programs.

IOLTA accounts: the basics

Attorneys are required to safeguard client funds and keep them separate from their own property. When the funds are too small in amount or held for too short a time to justify a separate interest-bearing trust account for the individual client, they must be deposited into an Interest on Lawyers’ Trust Account (IOLTA).

IOLTA accounts are established at approved banks or financial institutions. While IOLTAs are classified as checking accounts, they generate interest which is automatically remitted to the state’s IOLTA program. These pooled accounts combine nominal or short-term client funds across the firm’s matters, making compliance straightforward while benefiting the broader community.

Why attorneys use IOLTA accounts

Keeping client funds safe

Placing nominal or short-term client funds into an IOLTA account protects client property and prevents misuse. Funds remain liquid, secure and available for withdrawal to cover case-related expenses as needed.

Meeting ethical standards

Every jurisdiction requires attorneys to maintain proper trust accounting practices. IOLTA accounts are a core mechanism for compliance with these ethical rules, which include prohibitions on commingling, recordkeeping requirements and proper disbursement procedures.

Contributing to access-to-justice initiatives

While clients do not receive the interest generated from IOLTA accounts, those funds are directed to state-administered programs that fund legal aid services, law school scholarships and other justice-related initiatives.

Who manages IOLTA accounts?

Although attorneys and law firms are responsible for opening and maintaining IOLTA accounts, each state’s IOLTA program collects and distributes the interest earned. Lawyers do not have access to or control over the interest. Instead, they are responsible for ensuring client funds are deposited correctly and records are maintained in accordance with bar or court rules.

How IOLTA accounts work in practice

  • An attorney deposits nominal or short-term client funds into the firm’s IOLTA account 
  • The bank tracks the balance and remits any interest directly to the state’s IOLTA program 
  • The state program distributes the funds as grants to support access-to-justice initiatives

The principal client funds remain available for disbursement and are kept separate from the lawyer’s personal or operating accounts.  Additionally, attorneys can create multiple accounts for their clients to keep funds separate.

A critical tool for ethical law practice

IOLTA accounts are more than an administrative requirement. They are an essential safeguard for attorneys managing client property. By maintaining an IOLTA account, lawyers comply with professional obligations while contributing to programs that expand access to justice in their communities.

Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.