A DISCUSSION ABOUT INSURED IOLTAS « Back Next » On November 26, 2008, the FDIC issued its final rule which classifies Interest on Lawyer Trust Accounts (IOLTAs) as "non-interest bearing" accounts for purposes of the Transaction Account Guarantee (TAG) program. Since Community Bank of San Joaquin is participating in this program, the funds in these accounts are guaranteed in full. In order for the funds of each individual client to be insured or guaranteed, attorneys that have IOLTAs established at any institution participating in TAGP must have accurate records reflecting that the IOLTA account is a fiduciary account and how much is held in trust for each client. Poor trust
accounting records can cause the loss of insurance, so make sure your records are in order. FDIC's Final Rule Regarding IOLTAs and TAG
The following information is an excerpt of the FDIC's Temporary Liquidity Guarantee Program; Final Rule (12 CFR Part 370) as it relates to IOLTAs: In general, for purposes of the Transaction Account Guarantee Program, the FDIC wishes to maintain the distinction between (1) noninterestbearing accounts and (2)
interest-bearing accounts. As discussed below, however, the FDIC has decided to create certain exceptions. First, the FDIC has decided to create an exception for IOLTAs. As noted by the commenters, the interest on IOLTAs does not inure to the benefit of either the law firm or the clients. Thus, from the perspective of the law firm and the clients, the account produces the same economic result as a noninterest-bearing transaction account. For this reason, the FDIC has amended the
definition of "noninterest-bearing transaction account" to include IOLTAs. In providing protection to IOLTAs, the FDIC also includes attorney trust accounts designated as "IOLAs" or "IOTAs" (as such accounts are designated in some states). The FDIC will treat all such accounts as IOLTAs for purposes of the Transaction Account Guarantee Program. Accordingly, in the Final Rule the FDIC has provided that the term "noninterestbearing transaction account" shall include IOLTAs (or
IOLAs, or IOTAs). As a result, assuming that the other requirements of the Transaction Account Guarantee Program are met by a participating entity and irrespective of the standard maximum deposit insurance amount defined in 12 CFR Part 330, IOLTAs will be guaranteed by the FDIC in full as noninterest-bearing transaction accounts. The complete TAGP Final Rule document is available online at http://www.fdic.gov/news/board/08BODtlgp.pdf.
| 
