# Interest on Lawyers' Trust Accounts *Method of funding charitable purposes, chiefly civil legal aid, through interest earned on pooled lawyer trust accounts* Interest on Lawyers' Trust Accounts (IOLTA) is a funding mechanism. It directs the interest earned on certain pooled client trust accounts held by lawyers to charitable ends, chiefly civil legal services for people who cannot pay for them.[^1] In the United States it became possible after Congress changed federal banking law in 1980 to let some checking accounts earn interest. The Florida Bar Foundation started the first American program in 1981.[^1] IOLTA programs now operate in every state, the District of Columbia and the U.S. Virgin Islands.[^1] The [[Supreme Court of the United States]] upheld IOLTA against a Fifth Amendment takings challenge in [[Brown v. Legal Foundation of Washington]].[^2] ## How it works Lawyers regularly take in money that belongs to clients, often called "trust money," and hold it until it is needed.[^3] Sums that are large, or that will be held for a long time, are customarily placed in a separate interest-bearing account for that client.[^3] For small or briefly held sums, opening and administering an individual account would cost more than the interest it earned, leaving the client worse off.[^3] Before IOLTA, such nominal or short-term funds were combined in a single checking account that paid no interest.[^3] Until 1981, federal law barred commercial banks from paying interest on demand deposits such as checking accounts. Professional ethics also forbid lawyers from profiting from client funds, so the lawyer could not take the interest either.[^3] Under IOLTA, these funds go into pooled accounts that do bear interest, and the interest is forwarded to the state IOLTA program for charitable use.[^3] Almost every U.S. program spends the money on grants to organizations that give civil legal aid to low-income residents. Many also make grants aimed at improving how justice is administered in their state.[^3] A lawyer's IOLTA, also often called a "trust account," is subject to extensive regulation.[^3] ## History The earliest IOLTA programs began in the late 1960s in Australia and Canada. They raised money for legal services for the poor and for other charitable uses.[^4] U.S. programs are organized state by state, each under its own rules and regulations.[^4] Most were created by court rule, and a smaller number were set up by a state [[Legislature]].[^4] Administration often falls to the charitable arm of a state's bar association, though some states have established separate bodies to run their programs.[^4] IOLTA income has grown into a major funding source for civil legal services nationwide. It also fluctuates, because it depends wholly on prevailing interest rates and economic conditions.[^4] ## Legality IOLTA covers only client funds that are "nominal in amount or held for a short period of time"; larger sums held for an individual client fall outside the program.[^2] In practice, qualifying funds tend to be either modest sums held for a long time or substantial sums held briefly.[^2] The lawyer decides whether a particular client deposit is large enough, or will be held long enough, to warrant investing it separately for that client, as was the case before IOLTA existed.[^2] Since IOLTA began, litigants in a number of cases have contended that the programs amount to an unconstitutional taking under the Fifth Amendment.[^2] In *Brown v. Legal Foundation of Washington*, the Supreme Court upheld IOLTA. It reasoned that no "taking" of client money occurs, because the funds held for the individual client would not have produced any net interest for that client.[^2] ## Canadian practices Law foundations were established in each Canadian province over a 15-year span beginning in 1971.[^5] Most received a mandate covering five areas: legal aid, legal education, legal research, law reform and law libraries.[^5] In some provinces, the governing legislation or regulations also set funding formulas for dividing money among those mandates.[^5] Every province remits the interest generated by pooled trust accounts to its law foundation.[^5] ## Notes [^1]: Wikipedia contributors, *Interest on Lawyers' Trust Accounts*, lead section (revision 1354094987, retrieved 2026-10-26; CC BY-SA 4.0) — definition of IOLTA, 1980 federal banking change, Florida Bar Foundation program of 1981, coverage of every state, D.C. and the U.S. Virgin Islands. https://en.wikipedia.org/wiki/Interest_on_Lawyers'_Trust_Accounts [^2]: Wikipedia contributors, *Interest on Lawyers' Trust Accounts*, section "Legality" (revision 1354094987, retrieved 2026-10-26) — the "nominal in amount or held for a short period of time" standard, lawyer discretion, Fifth Amendment takings challenges, and the holding in *Brown v. Legal Foundation of Washington*. https://en.wikipedia.org/wiki/Interest_on_Lawyers'_Trust_Accounts [^3]: Wikipedia contributors, *Interest on Lawyers' Trust Accounts*, section "How it works" (revision 1354094987, retrieved 2026-10-26) — handling of client trust money, the pre-1981 bar on interest on demand deposits, pooling, remittance of interest, grant uses, and regulation of trust accounts. https://en.wikipedia.org/wiki/Interest_on_Lawyers'_Trust_Accounts [^4]: Wikipedia contributors, *Interest on Lawyers' Trust Accounts*, section "History" (revision 1354094987, retrieved 2026-10-26) — origins in Australia and Canada in the late 1960s, state-specific U.S. programs created by court rule or legislature, administration, and revenue instability. https://en.wikipedia.org/wiki/Interest_on_Lawyers'_Trust_Accounts [^5]: Wikipedia contributors, *Interest on Lawyers' Trust Accounts*, section "Canadian practices" (revision 1354094987, retrieved 2026-10-26) — provincial law foundations founded from 1971 over 15 years, five mandate areas, funding formulas, and remittance of trust-account interest. https://en.wikipedia.org/wiki/Interest_on_Lawyers'_Trust_Accounts