What is an IOLTA Account? – Excel for Lawyers Tutorial

What is an IOLTA Account?: Video Lesson

            This video lesson, titled “IOLTA Basics,” helps answer the question “What is an IOLTA account?” This video lesson is from our complete Excel for Lawyers tutorial, titled “Mastering Excel Made Easy for Lawyers v.2019 and 365.”

What is an IOLTA Account?: Overview

            The question “What is an IOLTA account?” is a question many new lawyers ask. Legal professionals use an IOLTA, or Interest on Lawyer’s Trust Account, to hold client funds separately from the funds of a law firm or individual lawyer. An IOLTA account is an interest-bearing checking account. The interest earned from all IOLTA accounts within a state is pooled together to help low-income individuals afford legal aid.

            Lawyers use an IOLTA account in three main situations. First being when a lawyer receives funds from a client to perform legal services. Second being when a lawyer receives funds from a settlement that they must pay to a client. Third being when a lawyer receives funds or is otherwise holding property for clients that the lawyer has not yet earned or must return at a later date. A lawyer cannot hold their funds and the client’s funds in the same account. Therefore, they use IOLTA accounts to separate these funds and hold smaller amounts of money from clients for a short span of time.

            An important note to make here is that if a lawyer intends to hold a large sum of money for a client, or intends to hold the funds for an extended period of time, the lawyer should NOT place those funds into an IOLTA account but should rather place the funds into an account to be held in trust for that particular client.

What is an IOLTA Account? – Excel for Lawyers Tutorial: A picture of a simple IOLTA account ledger created in an Excel worksheet.

            Our Excel for Lawyers tutorial shows how to perform basic financial tracking of an IOLTA account within an Excel workbook. Note that while it shows how to perform the tracking of these funds using checkbook register style worksheets within a workbook, doing this does NOT typically satisfy ALL of the IOLTA reporting requirements needed by the individual states. You will still need to consult your own state’s Bar Association or counsel to ensure that you are tracking and reporting the IOLTA account funds in accordance with their guidelines.

            It is important to note each state has its own rules of professional conduct regarding handling client trust funds. You should consult your own state’s Bar Association or counsel to ensure your setup complies with your state’s rules. Failure to comply could result in penalties. You can also find more information and resources about IOLTA accounts at the following link: American Bar Association IOLTA Resources.