An IOLTA account is a bank account that holds client money temporarily while a lawyer handles your case
IOLTA stands for Interest on Lawyer Trust Accounts. When you pay a lawyer a retainer, settle a case, or deposit money for costs (court fees, expert witnesses, title searches), that money does not go into the lawyer's business account. It goes into an IOLTA account instead — a separate trust account held in the lawyer's name but legally owned by you.
The account exists to keep your money separate from the firm's operating funds. If the law firm goes bankrupt or closes, your money is still there. The interest earned on the account (usually small) goes to state bar associations to fund legal aid programs for people who cannot afford lawyers. You do not see that interest — it is the trade-off for having a protected account.
IOLTA accounts are required by state bar rules in all 50 states. Every lawyer who handles client money must use one. The rules are strict: the lawyer cannot touch the money except to pay you, pay third parties on your behalf, or return it to you when the case ends.
Key Takeaways
- IOLTA accounts hold your money separately from the lawyer's business funds, protecting it if the firm fails financially.
- Interest earned on the account goes to state bar associations for legal aid programs, not to you or the lawyer.
- Your lawyer can only withdraw money to pay you, pay third parties (like courts or experts) on your behalf, or return unused funds to you.
- State bar rules require all lawyers to use IOLTA accounts for client money; the rules vary slightly by state but the core protection is the same everywhere.
When money goes into an IOLTA account
Money enters an IOLTA account at several points in a legal matter. The most common is a retainer — an upfront payment you give the lawyer to begin work. If you pay $5,000 to start a divorce case, that $5,000 goes into IOLTA, not the firm's checking account.
Settlement money also goes into IOLTA temporarily. If you win a case and the other side pays the lawyer directly (which happens often), that money sits in IOLTA until the lawyer deducts their fee and costs, then sends you the remainder. Court-ordered deposits — money you must place with the court but the lawyer holds temporarily — also land in IOLTA.
Any money you give a lawyer for costs goes into IOLTA: filing fees, deposition transcripts, expert witness retainers, title search fees, medical record requests. The lawyer withdraws it from IOLTA to pay the vendor, then accounts to you for what was spent.
How the lawyer uses money from your IOLTA account
Your lawyer can withdraw from your IOLTA account only for three reasons: to pay you, to pay someone else on your behalf, or to pay themselves for fees you have already agreed to.
If you are owed money at the end of a case, the lawyer withdraws your share from IOLTA and sends it to you. If a court filing costs $300 and you authorized it, the lawyer withdraws $300 from IOLTA and pays the court. If you agreed the lawyer would charge $2,000 for a task and the work is done, the lawyer withdraws $2,000 from IOLTA as payment for their time.
The lawyer cannot withdraw money for any other reason. They cannot use your IOLTA funds to pay their office rent, their staff, or their other clients' bills. That is the entire point of the account — your money stays yours until it is actually spent on your case or paid to you.
What happens to interest earned on IOLTA accounts
Banks pay interest on IOLTA accounts, though the rate is usually very low — often 0.01% or less, depending on the bank and the account balance. You do not receive this interest. Instead, it goes to your state bar association's Law Foundation or similar organization, which uses it to fund legal aid for low-income people.
This arrangement is called IOLTA interest. It is a requirement in every state. The lawyer does not keep the interest, and you do not get it — it is a small public benefit built into the system. If you have $10,000 in an IOLTA account for six months, you might earn $0.50 in interest. That $0.50 goes to legal aid.
Some states allow lawyers to use IOLTA accounts that earn higher interest rates, but those accounts have restrictions — they must hold a minimum balance or meet other conditions. The lawyer must follow state bar rules about which type of account to use for which client funds.
How IOLTA accounts protect your money
IOLTA accounts are protected by state law and state bar rules. The money in the account is held in trust — legally, it belongs to you, not the lawyer, even though the lawyer's name is on the account. If the law firm is sued, the money in IOLTA cannot be seized to pay the firm's debts. If the lawyer dies or the firm closes, the money is still there and must be returned to you or held until your case is resolved.
Banks that hold IOLTA accounts must follow specific rules. They cannot freeze the account without a court order, and they must notify the state bar if the account is overdrawn (which is a serious violation of bar rules). Some states require IOLTA accounts to be held at banks that are members of the FDIC, so your money has federal deposit insurance protection up to $250,000.
If a lawyer misuses IOLTA funds — withdraws money without authorization, uses client money for personal expenses, or fails to account for where money went — the state bar can investigate, fine the lawyer, suspend their license, or disbar them. Clients can also sue for theft or breach of trust. This is one of the most serious violations a lawyer can commit.
Tracking your IOLTA account balance
Your lawyer should give you regular statements showing what is in your IOLTA account and how it has been used. If you paid a $5,000 retainer and the lawyer has spent $1,200 on court filings and expert fees, your statement should show $3,800 remaining. You have the right to ask for this information at any time.
If you do not receive statements, ask for them. If your lawyer cannot explain where your money went or the numbers do not match what you authorized, that is a red flag. You can contact your state bar's ethics hotline or disciplinary office to report concerns about how your IOLTA funds are being handled.
When your case ends, your lawyer must return any unused IOLTA funds to you within a reasonable time — usually within 30 days. If money is owed to you from a settlement or judgment, it should come from IOLTA. If your lawyer is holding IOLTA funds after the case is closed and you have asked for them back, contact your state bar.
IOLTA accounts and different types of legal work
IOLTA rules apply to all lawyers, but the way money flows varies by practice area. In a personal injury case, you might pay a retainer, the lawyer advances costs, and a settlement comes in months later — all flowing through IOLTA. In a real estate closing, the lawyer holds earnest money and closing funds in IOLTA until the deal closes. In a criminal defense case, you pay a retainer that sits in IOLTA while the lawyer works.
Some lawyers handle cases on contingency, meaning they take a percentage of what you win instead of charging upfront. Even then, if you pay costs or if a settlement comes in, that money goes into IOLTA. The lawyer's fee is deducted from IOLTA when the case settles, and the remainder goes to you.
Frequently Asked Questions
Can my lawyer use my IOLTA money to pay for their office expenses?
No. IOLTA funds can only be used to pay you, pay third parties on your behalf (like courts or vendors), or pay the lawyer's fee for work already done on your case. Using client IOLTA money for office rent, staff salaries, or other business expenses is theft and a serious bar violation.
What if my lawyer's firm goes out of business while I have money in IOLTA?
Your money is protected. IOLTA accounts are held in trust, so they are not part of the firm's assets if it fails. The money must be returned to you or held until your case is resolved. Your state bar can help locate your funds if the firm closes suddenly.
Do I earn interest on my IOLTA account?
No. The interest earned on IOLTA accounts goes to your state bar association's legal aid programs. You do not receive the interest, and neither does your lawyer. This is required by state bar rules in all states.
Can I ask to see my IOLTA account statements?
Yes. You have the right to know how much money is in your account and how it has been spent. Ask your lawyer for statements at any time. If they refuse or cannot explain where your money went, contact your state bar's ethics office.
What happens to unused IOLTA funds when my case ends?
Your lawyer must return any unused funds to you within a reasonable time, usually 30 days. If money is owed to you from a settlement or judgment, it comes from IOLTA. If your lawyer is holding funds after the case is closed and you have asked for them back, contact your state bar.