IOLTA—Frequently Asked Questions

[These FAQs are neither legal advice nor an ethics opinion, and are not a substitute for your obligation to adhere to the requirements of the Michigan Rules of Professional Conduct (MRPC), the Michigan Code of Judicial Conduct , statutes, court rules, and/or case law and to review ethics opinions. This document does not reflect the ethical implications of any updates, modifications, or added features.]

General Information


General Information

What factors should be considered when determining whether to place funds in an IOLTA or non-IOLTA account and who should I call for guidance?

There are several factors to consider when determining whether funds should be placed in an IOLTA or non-IOLTA. In general, if the funds will earn income for the client or third person in excess of the costs incurred to safeguard the funds while held by the lawyer, they must be deposited into a non-IOLTA account. If the funds will not earn income in excess of the costs incurred, they must be deposited into an IOLTA account. A lawyer's good-faith decision regarding the deposit or holding of trust funds in an IOLTA account is not reviewable by a disciplinary body. However, the decision whether to place funds in an IOLTA or non-IOLTA should be reviewed at “reasonable intervals to determine whether changed circumstances require the funds be deposited in a non-IOLTA (MRPC 1.15(j)).” (See also Ethics opinion R-21)

The factors for consideration are set forth in MRPC 1.15(e). Below are two examples of an IOLTA vs non-IOLTA analysis. These examples use the factors in MRPC 1.15(e) to determine whether funds should be held in an IOLTA. These factors include:

  1. the amount of funds;
  2. the length of time the funds will be held;
  3. the interest rates or yield;
  4. the possible costs associated with maintaining that account, i.e. tax preparation or bank charges;
  5. the lawyer’s and the bank’s ability to calculate and pay the income to that client or third-party for whom those funds are being held; and
  6. any other relevant factors.

A lawyer will also need to determine the interest rate on the non-IOLTA account by calculating the expected net return, and if there is a net return, deposit the funds into a non-IOLTA. If there is zero net return, the lawyer should deposit the funds into an IOLTA account.

The following are some examples of assessments:

  1. Assume the interest rates is 1.25%. You receive a small retainer of $4,000 that is placed in an IOLTA account. The fees for that account are $10 and the funds will be held for approximately 60 days because that is how long the case is anticipated to last. To calculate:
  1. $4,000 (initial retainer) x 1.25% (interest rate) = $50.00
  2. $50/365 days (number of days in a year) = $0.14/day → per diem interest the client would earn
  3. 60 days (the amount of time the funds are anticipated to be held) x $0.14/day = $8.40
  4. $10.00 (fees) - $8.40 = $1.60

In this assessment, you can see there is no net return for the client and so your decision would be to deposit the $4,000 retainer into your IOLTA account.

  1. You receive a settlement check of $1.5 million. There are no fees because the bank has decided to waive the fees due to the amount within the account. The funds will be held for approximately 60 days. To calculate:
  1. $1.5 million (settlement proceeds) x 1.25% (interest rate) = $18,750
  2. $18,750 / 365 days (amount of days in a year) = $51.37 → per diem interest the client would earn.
  3. 60 days (the amount of time the funds are anticipated to be held) x $51.37/day = $3,082.19
  4. There is $300 for administration of the account (MRPC 1.15(e)(2)); $3,082.19 - $300 (administration fee) = $2,782.19

Estimated costs to establish and administer the account, including but not limited to the lawyer’s services, preparation of tax reports, or other associated costs, may vary. Therefore, in this scenario, there being a net return for the client, the result or decision would be to deposit the $1.5 million into your non-IOLTA account.


Does a lawyer have to maintain fixed or flat fees in an IOLTA and when can those fees be withdrawn from the IOLTA?

Yes. Lawyers must maintain unearned fixed or flat fees in an IOLTA. “If a fixed fee, or a portion of a fixed fee, is for services to be performed in the future, the fee must be placed in the client trust account until the lawyer has performed the services to which the client is entitled.” RI-069. Fixed fees paid in advance may be withdrawn from the client trust account in accordance with a written agreement providing that portions of the fee are earned by the lawyer based upon the passage of time during the representation or the completion of certain tasks. In the absence of an agreement setting forth the conditions under which portions of a fixed are earned, the lawyer must complete all services contracted for prior to withdrawing any amount of an advanced fixed fee from a client trust account for the lawyer's personal use. This does not address non-refundable fees:

If … funds are termed a "flat or fixed fee" and are charged in advance with no agreement between the client and lawyer as to refundability, because the services are to be performed in the future, the fee is unearned and must be placed in a client trust account until the lawyer has performed the services to which the client is entitled. RI-069.


I received a check made payable to my firm and a third-party or client and do not have written authority to sign the check on their behalf. May I deposit that check into my IOLTA without the third-party or client signature?

This is not a question of ethics, but one of law. MCL 440.3110(4) and case law provide that the statutory signature requirements must be met even when funds are to be deposited into a lawyer trust account. Please see University of Michigan Regents v Valentino, unpublished per curiam opinion of the Court of Appeals, issued December 20, 2020 (Docket No. 349942), p 7, which concluded: “Defendant has not pointed to any caselaw — nor were we able to find any caselaw — to suggest that MCL 440.3110(4) is not implicated by an attorney depositing funds into an IOLTA account. Nor would it seem logical that an attorney could overcome the requirements of MCL 440.3110(4) by simply depositing any check bearing his name into an IOLTA account. That is, simply because defendant believed he was entitled to some of the funds at issue did not permit him to improperly negotiate the check in order to place those funds into his IOLTA account.”


Can a lawyer direct deposit funds (through ACH) from the lawyer’s IOLTA to a client’s account instead of sending a check when disbursing funds to the client?

Yes. The lawyer may direct deposit funds to a client’s account from the lawyer’s IOLTA instead of sending a check when disbursing funds to the client, but the lawyer must keep records under MRPC 1.15 and ensure that it is actually the client’s account. Lawyers should be aware of hacked emails and/or account scams. The lawyer may consider contacting their financial institution when sending direct payments out of the IOLTA to determine options to protect the IOLTA’s routing and transit information.


Are separate IOLTAs needed when attorneys/law firms are licensed and practice in multiple states?

Probably. If an attorney accepts funds which must be held pursuant to MRCP 1.15 on behalf of a Michigan client, those funds must be deposited into a Michigan IOLTA. The interest earned on Michigan IOLTAs are then remitted to the Michigan State Bar Foundation. Most jurisdictions have similar requirements,[1] necessitating an IOLTA that pays interest to the state’s IOLTA program. Please note that most national banks can maintain separate IOLTAs for each state, therefore, attorneys should inquire with their bank as to whether they have this option.

[1] See American Bar Association - Status of IOLTA Programs (accessed September 1, 2022)


What should an attorney do if their IOLTA is hacked and they need to close the account?

The attorney should complete the following steps:

  1. Follow your bank’s policies and close the account.
  2. Open a new IOLTA and submit a new Notice Form to the Michigan State Bar Foundation.
  3. Contact the Michigan Attorney Grievance Commission (313) 961-6585 to notify them of the breach and what steps have been taken.


Who can be a signer on an IOLTA?

Any lawyer member or employee of a law firm may be a signatory on an IOLTA and there is no requirement that a signatory be an attorney. See ethics opinion RI-107. See also, R-007:

Signatories. The account should be established in the name of the lawyer or law firm. In a solo practice, the lawyer may be the only account signatory. In a firm with more than one principal, accounting controls should be in place to handle trust account deposits and withdrawals in keeping with the lawyers' fiduciary, ethical and supervisory duties. See, MRPC 5.1 and 5.3. Lawyers are not absolved of liability for trust account misconduct by delegating accounting and record keeping responsibilities to an employee or agent.


Is a new Notice to Eligible Financial Institution form required if attorneys change at the law firm?

Only if the signatories on the account change. To ensure that only lawyer members or employees of the law firm have access to the IOLTA, the IOLTA Notice to Eligible Financial Institution form requires the attorney or firm opening the IOLTA to include all signatories with the firm. Law firms only need to send a new form and update the IOLTA (with financial institution approval) if the signatories on the account change, but not due to general staff turnover.


Can a credit/debit card be linked to an IOLTA for e-filing?

Yes. If permitted by the financial institution, a credit card or debit card can be linked to an IOLTA.


Who should be named as a payee when an attorney receives a settlement check for multiple clients for deposit into an IOLTA?

Ethics Opinion R-21 provides that the lawyer should ensure that “checks representing settlement proceeds are made payable either to the lawyer or law firm in trust for the client or jointly to the lawyer or law firm and the client.” Funds must be deposited into either an IOLTA or non-IOLTA trust account.


There are excess funds in an IOLTA. What should I do with these funds?

The answer depends on the source of the excess funds. A lawyer in possession of excess IOLTA funds must make diligent and reasonable efforts to determine the source.

If it is determined that the funds are excess interest that was not properly remitted to the Michigan State Bar Foundation, those funds should be remitted to the MSBF.

If it is determined that the funds belong to the law firm or lawyer, those funds must be removed immediately as holding the funds in the IOLTA is an ongoing violation of the comingling rule. The Michigan Rules of Professional Conduct require that earned fees must be timely removed from the account and, further, that the only allowable minimum balance in a lawyer trust account is an amount to avoid bank fees. A "buffer” to avoid overdrafts is not allowed. Again, these funds must be removed to avoid an ongoing violation of MRPC 1.15.

If it is determined that the funds are unclaimed, the funds are treated as abandoned property. Unclaimed funds are funds held for a missing client or third-party who cannot be located by reasonable effort, and for which there is no conceivable third-party claim to the funds. Pursuant to statute, the lawyer must comply with the Michigan Uniform Unclaimed Property Act and the funds escheat to the state. See RI-222, RI-58, and RI-38.

Unidentified funds are those which are not attributable to a client or third-party. Prior to determining that funds are unidentified, the lawyer in possession of the excess trust funds must make diligent and reasonable efforts to determine the true owner of the funds. If it is determined that the funds are unidentified, the funds may be donated to the Access to Justice Campaign administered by the Michigan State Bar Foundation or the State Bar of Michigan Client Protection Fund.


Does an attorney need to complete a new Notice to Eligible Financial Institution Form if their bank merges with another bank?

No. Attorneys do not need to complete a new Notice Form following a bank merger. However, it is prudent to review your statements and make sure your account is still properly set up as an IOLTA or non-IOLTA.


I just realized that the check I wrote from my IOLTA isn’t going to clear the bank. What should I do?

Don’t panic! The worst thing any lawyer can do is bury their head in the sand. Take a breath and review the following steps:

  1. Contact the financial institution to determine what happened and request the information be provided to you in writing.

  2. Consider your state of mind and the facts surrounding the overdraft. If it’s a financial institution error, you may consider taking the steps below on your own. However, if it involves intentional conduct, failure to institute proper accounting processes, or if you are concerned about liability, consider contacting an attorney who specializes in ethics defense to assist you with your answer. Some malpractice insurance policies cover grievance defense, so lawyers should also contact their carriers.

  3. Send a letter to the grievance administrator reporting and explaining what occurred and which steps have been taken or will be taken to correct the problem either on your own or through retained ethics counsel. Review the letter carefully before sending. Contact information for the Attorney Grievance Commission may be found here.


What trust account rules apply when a lawyer resides in another state but are representing Michigan clients?

When representing a Michigan client, a lawyer must abide by Michigan trust account rules as found in the Michigan Rules of Professional Conduct. If a lawyer is representing an out-of-state client, that particular’s state’s trust account rules must be followed.

Last updated: September 2022