April 2006

Ask the Auditor

by Trina Doty

Whether you're just opening an IOLTA account or have had one for many years, you may have had some misunderstandings with your bank about the nature of an IOLTA account. We frequently get calls from attorneys asking us to help. Following are some of the questions we've received:

My bank manager told me that I cannot write checks off my IOLTA account. Am I supposed to transfer the money to my business account and write the checks from there?

You must be able to write checks off an IOLTA account. It is not acceptable to transfer client money to a non-trust account and disburse the money from there. The purpose of the trust account is to protect client money. While the money is in a non-trust account, it is no longer protected.

I want to accept credit cards for advance fee deposits but my bank told me that I cannot do that with an IOLTA account.

There is nothing in RPC 1.14 that prohibits the use of credit cards. Many attorneys have found that accepting credit cards helps ensure payment by the client. If you do accept credit cards for advance fee deposits, the merchant account must be tied directly to your trust account. In other words, the credit-card deposit must go directly into your trust account. It cannot be transferred to your trust account from a non-trust account.

My bank will not allow my IOLTA account to appear as an account for my online banking.
My bank will not allow me to do a phone transfer from my IOLTA account.
My bank will not allow me to have a debit card for my IOLTA account.

There is nothing in RPC 1.14 that prohibits any of the above actions, although some banks may have a policy prohibiting these types of actions in an IOLTA account.

My bank is charging me for printing checks, wire fees, stop payments, etc. I thought the account was supposed to be free to me and those charges deducted from the interest earned.

RPC 1.14 (c)(1) requires banks to net certain charges against the interest earned in an IOLTA account. The charges are limited to those fees that are required to maintain the account, such as a monthly maintenance fee. Check-printing fees, wire-transfer fees, and stop payment fees cannot be deducted from the interest and must be paid by the attorney. In some circumstances it may be appropriate to pass certain costs on to the client.

If you have any questions about your trust account, or if you have any topics that you would like to see addressed in a future "Ask the Auditor," please feel free to call WSBA Audit Manager Trina Doty (206-727-8242), Auditor Cheryl Heuett (206-733-5937), or Auditor Jim Roberg (206-733-5921). 

Trina Doty is the WSBA audit manager, a CPA, and a certified fraud examiner. She oversees the random-examination program, conducts "for cause" audits, and educates attorneys as to trust account rules and regulations.