What Every Attorney Needs to Know about Escrow Accounts, IOLA, and Ethics
Handling attorney trust accounts is a large part of the practice of law in New York. Statewide, attorneys maintain over 48,000 IOLA accounts in approximately 200 banking institutions. Every New York lawyer who handles client funds must maintain an IOLA account. Lawyers must use an IOLA account for qualifying funds, unless he or she uses an account that will generate compute and pay net interest to the client (net of all bank fees and the lawyer’s or law-firms related services). A New York lawyer may not place qualifying funds in a non-interest bearing account. For additional information, visit www.iola.org.
Attorney Escrow Accounts Programs
Attorney Escrow Accounts 2017 | 4.0 Ethics Credits
Program Faculty: Monica A. Duffy, Esq. | Christine M. Fecko, Esq. | Michael G. Gaynor, Esq. | Sarah Jo Hamilton, Esq. | Timothy J. O’Sullivan, Esq.
Attorney Escrow Accounts: Traps for the Unwary 2017 | 0.5 Ethics
Program Faculty: Sarah Jo Hamilton, Esq. | Monica A. Dufy, Esq.
IOLA Accounts and the Lawyer’s Fund for Client Protection 2017 | 1.0 Ethics
Program Faculty: Christine Fecko, Esq. | Timothy O’Sullivan, Esq.
Attorney Escrow Accounts 2015 | 4.0 Ethics Credits
Program Faculty: Peter V. Coffey, Esq. | Monica A. Duffy, Esq. | Christine M. Fecko, Esq. | Michael G. Gaynor, Esq. | Timothy J. O’Sullivan, Esq. | Deborah A. Scalise, Esq.
Avoiding Ethical Nightmares: Attorney Escrow | 1.5 MCLE Ethics Credits
Everything you wanted to know about NYS Interest on Lawyers Account Fund (IOLA), but didn’t know to ask.
The New York Interest on Lawyer Account Fund (“IOLA”)
The New York State Interest on Lawyer Account Fund (“IOLA”) helps low income people in New York State obtain help with civil legal problems affecting their most basic needs, such as food, shelter, jobs and access to health care. The IOLA program is a partnership of lawyers, banks and community organizations. It produces millions of dollars each year to finance legal aid for low income New Yorkers and improvements in the administration of justice throughout New York State.
Participation in New York’s IOLA program is mandatory in two senses. First, every New York lawyer who handles client Funds must maintain an IOLA account. Second, the lawyer must use an IOLA account for qualifying funds, unless he or she uses an account that will generate compute and pay net interest to the client (net of all bank fees and the lawyer’s or law-firms related services). A New York lawyer may not place qualifying funds in a non-interest bearing account. Interest earned on deposits held in IOLA accounts are remitted directly to the IOLA Fund by participating financial institutions. Further information is available at www.iola.org.
Should you enroll? If you are a lawyer who maintains a qualifying client trust account and have not yet opened an interest-bearing IOLA account for making nominal or short-term deposits, you should take steps to do so immediately.
Enrollment takes just two easy steps. (1) Open an IOLA account with a participating financial institution. Banks vary widely in terms of the “net yield” (interest rate less service fees) their IOLA accounts pay into the IOLA Fund. See the list of banks with rate and fee information here. (2) Within 30 days of opening the IOLA account, submit the online Enrollment Form.
Attorney Escrow Accounts—Rules, Regulations and Related Topics, Fourth Edition (Forms on CD)
Attorney Escrow Accounts, Fourth Edition is a handy reference for newly admitted and seasoned attorneys. It comprehensively covers the most common situations where attorneys handle client funds and clearly discusses the legal and ethics issues encountered.
The Fourth Edition adds sections on Disability as a Defense to Conversion of Client Funds, Third-Party Liens, Responsibility for Acts of Others, Failure to Cooperate With Investigation and Broker Commission Escrow, and offers expanded discussions on liability, elements of the agreement, commingling of funds, and attorney compliance. It includes case law and substantive updates to the sections on restitution and reimbursement, fund expenses, trustee regulations and determinations, and the funds of missing and unknown clients. Every ethics opinion cited in the text is included in the Appendix.
The Fourth Edition also features a word-searchable CD, with text, statutes, regulations, opinions and forms.
Contents at a Glance
• Handling of Escrow Funds by Attorneys
• Escrow Agreements
• The Interest on Lawyer Account Fund of the State of New York (IOLA)
• Lawyers’ Fund for Client Protection of the State of New York
Author Bios and Table of Contents
Cases, Rules and Ethics Opinions Related to Attorney Escrow Accounts
Due to the fiduciary nature of the attorney-client relationship, an attorney must separate from his own properties and endeavor to keep those funds and other properties belonging to the client.
In re Le Pore, 43 A.D.2d 793 (4th Dep’t 1973). (Respondent commingled his client’s funds received from the real estate transaction with his own personal funds, drew a check or checks against his account for his use or for other clients, thereby reducing his bank balance below that required to pay his client, and issued a check to his client when his account had insufficient funds with which to honor it).
This is not merely an aspiration goal; any violation of the rules governing use of a client’s property will subject an attorney to discipline even if no actual loss occurred, and to personal liability in the event of loss of funds whether or not the attorney profited personally in any respect. In re Brown, 180 A.D.2d 150, 586 N.Y.S.2d 565, (N.Y. App. Div. 1st Dep’t 1992). (By commingling personal funds with client funds, respondent violated DR9-102(a) and 22 NYCRR § 603.15(a)).
As a basic protection, all funds of clients paid to a lawyer or law firm must be deposited in one or more identifiable bank accounts within the state of New York or elsewhere with the client’s written consent The only funds belonging to the lawyer or firm that may be deposited in those accounts are funds sufficient to pay bank service charges.
The exceptions to the rule are money advanced for future costs and withdrawal of funds due and owing. However, if there is any dispute, the disputed portion must remain in the separate client account pending resolution of the controversy.
RULE 1.15: PRESERVING IDENTITY OF FUNDS AND PROPERTY OF OTHERS; FIDUCIARY RESPONSIBILITY; COMMINGLING AND MISAPPROPRIATION OF CLIENT FUNDS OR PROPERTY; MAINTENANCE OF BANK ACCOUNTS; RECORD KEEPING; EXAMINATION OF RECORDS