D.C. makes participation in lawyers trust account program mandatory

By Amanda Becker
Monday, July 26, 2010

Beginning next month, members of the District of Columbia Bar holding client funds in nominal amounts will be required to do so in special interest-bearing accounts aimed at generating money for legal aid organizations.

The rule change was approved by the D.C. Court of Appeals and is slated to take effect Aug. 1. It is intended to increase attorney participation in the District's Interest on Lawyers Trust Account program.

The program, like those in all 50 states and the U.S. Virgin Islands, pools client money in special bank accounts so the interest generated can be used to help defray the legal costs of those who cannot afford to pay. The revenue generated by such programs has fallen as interest rates have declined during the economic uncertainty.

The D.C. Bar Foundation, which distributes such funds to civil legal services providers in the District, reports that IOLTA revenue dropped by more than 60 percent last year. Even though the nonprofit dipped into its reserves, it could provide only half the funding it did in 2008.

Mandatory participation "strengthens the IOLTA program," said Bar Foundation Executive Director Katherine L. Garrett.

The rule change brings the District in line with 41 other jurisdictions that mandate participation in IOLTA programs. Delaware will adopt a comprehensive program at the beginning of November.

Though participation in the program will now be mandatory, attorneys who are licensed in the District but "principally practicing" elsewhere can satisfy the new rules by participating in an IOLTA program in their primary jurisdiction. If a court issues contrary instructions as to how client funds should be maintained, attorneys must comply with that order.

"There's no blanket answer for everyone," Garrett said, encouraging those with questions to contact the foundation.

IOLTA accounts can be opened at financial institutions that have been selected by the D.C. Bar. A list of approved banks, which were chosen based on favorable interest rates, is available on the Web site of the D.C. Bar Foundation.

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