IOLTA stands for “Interest on Lawyers’ Trust Accounts.”
IOLTA is a unique and innovative way to increase access to justice for individuals and families living in poverty. Without taxing the public and at no cost to lawyers or their clients, interest generated on certain funds in lawyers’ trust accounts—IOLTA—is used to support civil legal aid and improvements in the justice system.
Lawyers routinely receive client funds that are held in trust accounts for future use. When the amount is large or if the funds are to be held for a long time, lawyers place these funds in interest-bearing accounts for the benefit of their clients.
When client funds cannot practically earn income for the client, the funds are deposited in a pooled account, an IOLTA account. The income generated on the pooled funds is used for civil legal aid and other programs that support access to justice for low-income people.
There are IOLTA programs throughout ten Canadian provinces and three territories and all United States jurisdictions—including the District of Columbia, Puerto Rico and U.S. Virgin Islands.
IOLTA programs find their homes in a range of organizational structures. Many are based in nonprofit foundations, while others are operated by the courts or other public entities.
IOLTA Funding and the Justice Gap
IOLTA is one of several significant funding sources for civil legal aid. However, there is a gaping chasm between needs and resources.
In the 2017 Justice Gap Report, funded by Legal Services Corporation, the University of Chicago found that “…86% of the civil legal problems reported by low-income Americans received inadequate or no legal help.” There are simply not enough resources to help everyone in need.
Unlike the criminal justice system, people with civil legal problems are not guaranteed an attorney. From the abused woman trying to find safety for herself and her children to the elderly woman being unlawfully evicted from her home, civil legal aid exists to ensure that all people have access to the civil justice system.
IOLTA programs were first established in Australia and Canada in the late 1960s and early 1970s to generate funds for legal services for low-income and vulnerable individuals.
In the late 1970s, The Florida Bar and other organizations filed a petition to establish the first IOLTA program in the United States. After legislation permitted the establishment of interest-bearing checking accounts in the early 1980s and the Florida advocates obtained important tax rulings from the IRS, the Florida Bar Foundation launched the first IOLTA program in 1981. Shortly thereafter, California, Idaho, Maryland, and others followed suit.
IOLTA programs were established after much consideration and review to ensure adherence to the law. During the 1990s a series of cases challenged the IOLTA program concept, but in 2003, the United States Supreme Court upheld the constitutionality of IOLTA.