Delaware IOLTA Program

Yes. Delaware’s IOLTA Rules maximize the revenue available for the charitable purposes of the IOLTA program by ensuring that all appropriate funds are maintained in IOLTA accounts and that those accounts earn competitive interest rates.

Funds of a client or third person are “IOLTA-eligible” and shall be deposited in a lawyer or law firm IOLTA account unless the lawyer or law firm reasonably determines that the funds can earn income for the benefit of the client or third person in excess of the costs incurred to secure and distribute such income to the client or third person. Lawyers should consult Rule 1.15(f) when making this determination:

1. A lawyer holding client funds must initially and reasonably determine whether the funds should or should not be placed in an interest-bearing depository account for the benefit of the client. In making such a determination, the lawyer must consider the financial interests of the client, the costs of establishing and maintaining the account, any tax reporting procedures or requirements, the nature of the transaction involved, the likelihood of delay in the relevant proceedings, whether the funds are of a nominal amount, and whether the funds are expected to be held by the lawyer for a short period of time.

While each lawyer is required to comply with the IOLTA provisions of the Rules, members or associates of law firms may meet those requirements using law firm IOLTA accounts. You are not required to maintain an individual IOLTA account. If you are unsure whether your firm is placing all eligible funds in IOLTA participating accounts, contact your firm administrator.

If you are a lawyer engaged in the private practice of law and you receive IOLTA-eligible client funds (those that cannot earn income for the benefit of the client in excess of the costs incurred to secure and distribute that income to the client), then you or your law firm must establish and maintain a pooled IOLTA trust account. In addition, that account must be held at a financial institution certified as eligible by the DBF.

Lawyers/law firms that need to open an IOLTA account should complete the enclosed “Notice to Financial Institution” or download the form from the DBF’s website. Visit the financial institution to establish the new account with the completed form. A copy of the completed form should be forwarded to the Delaware Bar Foundation once the account is established.

Firm administrators should ensure that all IOLTA eligible funds accepted by the firm’s lawyers are properly deposited into IOLTA accounts. Similar to individual lawyers, firms should use the Notice to Financial Institution form to establish a new IOLTA account and forward a copy to the Foundation once the account is established

Yes. In fact, lawyers are expected to establish separate, interest-bearing accounts for client or third party funds when the sum is large enough and/or the duration is long enough to justify the cost of opening, administering and closing the accounts. Any interest accrued becomes the property of the client or third party. If the client or third party funds are not large enough or the duration is not long enough to earn income net of the costs associated with the account, then the funds must be placed in an IOLTA account at an eligible financial institution.

Eligible financial institutions are those that voluntarily offer IOLTA accounts and pay on an IOLTA account the highest rate of interest or dividends generally available from the institution to its non-IOLTA customers -- when IOLTA accounts meet or exceed the same minimum balance or other account eligibility qualifications, if any. The DBF certifies financial institutions as “eligible” and maintains a list of eligible financial institutions on its website.

The DBF will publish the list of eligible financial institutions that meet all Rule requirements on its website.

Rule 1.15 defines allowable reasonable service charges that may be netted against the interest earned on IOLTA accounts. They are “(a) per check or electronic debit charges; (b) per deposit or electronic credit charges; (c) a fee in lieu of minimum balance; (d) FDIC insurance fees or FDIC account guarantee fees; (e) a sweep fee; and (f) a reasonable IOLTA account administrative fee.” Check printing charges, wire transfer fees, bank or certified checks, cash management fees and overdraft costs, etc., are the responsibility of and may be charged to the lawyer or law firm maintaining the account. Lawyers with questions regarding applicable account fees should contact their financial institution to request a service charge disclosure. Lawyers may request the financial institution to waive fees, but, if unsuccessful, Rule 1.15 allows lawyers to maintain up to $1000 of the firm’s funds in the IOLTA account to cover the fees.

No. The current Rules require every lawyer in private practice who holds client or third party funds to establish and maintain trust/escrow accounts. This is true regardless of the size of the firm or whether the account is enrolled in IOLTA. The current Rules also require every lawyer who holds client or third party funds to make a good faith judgment about whether those funds belong in a pooled trust account or one set up solely for the benefit of that client.

If you are not in private practice in Delaware, you are exempt from participation in IOLTA and are only required to certify that status on the Delaware Supreme Court Annual Registration Statement. Additionally, if you serve as a Judge, Attorney General, Public Defender, U.S. Attorney, District Attorney, in-house counsel, teacher of law, are on active duty in the armed forces or employed by state, local or federal government and not otherwise engaged in the private practice of law, you are also exempt from participating in IOLTA.

IOLTA accounts which cannot be expected to generate enough interest to cover certain account fees may be exempted by the DBF from participation in the IOLTA program pursuant to revised Rule 1.15(h)(7). The Foundation may identify accounts to consider for exemption or the lawyer may submit a letter to the Foundation to request an exemption. The request must be accompanied by 12 months of past account records which document an historically low balance in an existing pooled trust/escrow account, and certify that the account activity is not expected to change in the next succeeding 12 months. Any lawyer or law firm who receives an exemption under revised Rule 1.15(h)(7) must also certify as part of its Annual Certificate of Compliance that the lawyer or law firm expects no material increase in activity in its exempted trust/escrow account during the succeeding 12 months. The Foundation will periodically review exempted accounts for continued compliance for exemption.

If the nature of your practice is such that you do not hold IOLTA-eligible funds of any client or third person, you do not need to establish an IOLTA account. Under the Rules, lawyers who do not hold IOLTA-eligible funds are only required to certify that status on the Annual Registration Statement.