The Massachusetts IOLTA Program for Lawyers

Explore the Massachusetts IOLTA Program, established in 1985, to collect interest on pooled trust accounts supporting civil legal aid organizations. Learn about IOLTA account management, funds allocation, insurance considerations, and the impact on increasing access to justice in Massachusetts.

• Massachusetts IOLTA
• Lawyers
• Legal Aid
• Trust Accounts
• Civil Justice

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Presentation Transcript

1. Massachusetts IOLTA Committee PRESENTATION TO LAWYERS CONCERNED FOR LAWYERS JULY 12, 2023 JENNA MIARA, EXECUTIVE DIRECTOR MASSACHUSETTS IOLTA COMMITTEE www.maiolta.org

2. Outline For Todays Session OVERVIEW OF THE IOLTA PROGRAM WHERE DOES THE MONEY GO? MANAGING AN IOLTA ACCOUNT LEADERSHIP INSTITUTION PROGRAM IOLTA AND CLASS ACTIONS UNDISTRIBUTABLE IOLTA FUNDS QUESTION & ANSWER

3. What is IOLTA ? Interest on Lawyers Trust Accounts Established by the SJC in 1985 to collect interest on pooled trust accounts to fund organizations that provide free civil legal aid and improve access to justice. Started as a voluntary program; mandatory (lawyers must participate) since 1989 IOLTA Committee has distributed more than $360 million Almost 200 Financial Institutions and over $2 billion on deposit in Mass. Exists in all 50 States, D.C., Puerto Rico, & Virgin Islands

4. What Funds go Into an IOLTA Account ? Mass. R. Prof C. 1.15 Safekeeping Property requires attorneys to deposit client funds that are short term or nominal in pooled IOLTA account. Used where an individual client account (e.g., an escrow account) is not practical because the interest earned for the client would be less than the cost of establishing and maintaining an individual account. Examples include: Retainers paid to attorney for future work, advanced costs and expenses Settlements paid to attorney on behalf of client Personal injury awards Real estate conveyancing funds A lawyer is not required to notify clients of participation in the IOLTA program but it is often a good idea to explain interest will go to the IOLTA Committee.

5. Insurance Issues for IOLTA Funds For FDIC and NCUA (credit union) insurance purposes, IOLTA accounts are treated as fiduciary accounts and qualify for pass-through coverage to the underlying owners (clients). Requires proper account titling and proper record keeping to verify the client balances. Each client in an IOLTA account is afforded the $250,000 maximum insurance coverage (for all funds they have at that institution, whether in an IOLTA account or not), regardless of the balance in the account. Contact the IOLTA Committee for additional information about ways to increase FDIC or NCUA insurance coverage, if needed.

6. Where does the money go? Interest is paid to the IOLTA Committee, which then disburses to three Court mandated charities: Massachusetts Legal Assistance Corporation (67%) Massachusetts Bar Foundation (26%) Boston Bar Foundation (7%) The three charities fund civil legal aid organizations throughout Massachusetts that increase access to justice and provide critical legal assistance to people who cannot afford an attorney when faced with legal problems including: Housing Public benefits Access to healthcare Employment Child custody Consumer debt

7. Where does the money go? The IOLTA Committee has other sources of revenue, which are distributed along with the interest: Pro hac vice fees Access to Justice fee Cy pres awards from class actions Undistributable IOLTA funds In 2022, interest revenue was ~$9.5mil, and the other sources of revenue totaled ~$4.5mil. Expect $20mil+ in interest revenue in 2023.

8. Do I need an IOLTA account? Under Rule 1.15, all lawyers engaged in the practice of law who have a physical office in MA must establish a MA IOLTA account once they receive client funds that are nominal in amount or will only be held for a short time. Lawyers do not need a Massachusetts IOLTA account if, e.g, they: Are a licensed attorney in MA but they have no physical law office in MA. Are unemployed or not practicing as an attorney. Are engaged in the practice of law but not within a private practice (e.g. in house counsel, teacher, publicly employed) and do not receive client funds. Our website has info on opening an IOLTA account, including a list of approved banks and credit unions and a required Notice of Enrollment.

9. Managing an IOLTA Account Review IOLTA Committee s Client Funds Manual and FAQs on www.maiolta.org Attend BBO trust fund record-keeping training webinar (Fall 2023) and review training slides: 20201218 Trust Account Training 4 publication AMC Copy (massbbo.org) Contact the IOLTA Committee at 617-723-9093 or questions@maiolta.org Follow us on social media for updates Twitter @MAIOLTA Facebook https://www.facebook.com/IOLTA LinkedIn https://www.linkedin.com/company/massachusetts-iolta- committee/

10. Leadership Financial Institutions Banks and credit unions that participate in the Leadership Institutions program pay a higher interest rate on their IOLTA accounts to better support the organizations funded by the IOLTA Committee. Leadership rate eff. 6/1/23 = 3.94% vs. 0.25% or even 0.1% Keeping your IOLTA account at a Leadership Institution generates more funding for legal aid. More info, including a list of current Leadership Institutions: Leadership Institutions (maiolta.org)

11. IOLTA and Class Actions Mass. R. Civ. P. 23 permits the IOLTA Committee to receive residual funds in any class action and requires notice to the Committee of the proposed distribution of residual funds in any MA state court class action (eff. 9/1/23: at least 30 days) before final judgment or preliminary approval of a settlement. The IOLTA Committee is also an appropriate cy pres recipient in class actions in federal court and has been approved in many federal cases. Cy pres funds are a critical source of revenue for the IOLTA Committee and grantee organizations.

12. Undistributable IOLTA Funds Undistributable IOLTA Funds occur when there are funds in an IOLTA account whose owners are unknown or cannot be located. Currently, the Rules of Professional Conduct do not provide guidance on how to handle undistributable funds. In late 2020, the SJC held in Olchowski that undistributable funds should be remitted to the IOLTA Committee not the Unclaimed Property Division of the State Treasury. Amended rules reflecting this decision and setting up a process are pending and not yet final. The Office of Bar Counsel is now accepting applications to transfer undistributable IOLTA funds to the IOLTA Committee. Download the form from www.massbbo.org or request via email at IOLTAFunds@massbbo.org or by telephone at 617-728-8782. IOLTA Committee will continue to provide guidance and updates.

13. Discussion/Q & A

14. For Further Information MASSACHUSETTS IOLTA COMMITTEE 18 TREMONT STREET, SUITE 1010 BOSTON, MA 02108 617-723-9093 WWW.MAIOLTA.ORG QUESTIONS@MAIOLTA.ORG EMAIL US ANY TIME: Jenna Miara, Executive Director jmiara@maiolta.org Steve Casey, Chief Financial Officer scasey@maiolta.org