Michigan State Bar Foundation
— NEWS RELEASE —

306 Townsend Street, Lansing, Michigan 48933 ♦ FAX: 517-371-3325
Telephone: 1-800-968-6723 ♦ Web Site: www.msbf.org
Contact Person: Linda K. Rexer, Executive Director
 

IOLTA INTEREST/DIVIDEND REQUIREMENTS
UPDATED BY MICHIGAN SUPREME COURT

June 23, 2005, Lansing – The Michigan Supreme Court has updated interest/dividend rate parity provisions in Michigan Rules of Professional Conduct 1.15. Interest on Lawyers Trust Accounts (IOLTA accounts) can now earn the same interest or dividend rates generally available to similarly-situated non-IOLTA customers at the same financial institution.

The Court also approved attorney IOLTA guidelines published by the Michigan State Bar Foundation, which has administered IOLTA since 1990. The guidelines note that the Foundation will work with banks on implementation and will contact those lawyers who may be affected. Linda Rexer, Executive Director of the Foundation, said “Only a limited number of higher balance IOLTA accounts will be affected; most IOLTA accounts will remain unchanged. Lawyers and bankers should contact the Foundation with questions before taking action. More detailed information for lawyers and banks is available on the Foundation’s web site at www.msbf.org.”

The 1990 IOLTA rule provided for interest rate parity for similar accounts, which pegged IOLTA to low-rate interest checking accounts, even when balances exceeded minimum requirements for higher rate products. The rule change requires higher rate options for qualifying IOLTA accounts, but financial institutions do not have to create new products if these are not already available to their other customers. A number of IOLTA programs in other states have similar rate parity provisions. Of course, neither lawyers nor clients will lose any funds since IOLTA continues to involve only funds that a lawyer would not otherwise invest on the client’s behalf because those funds would not produce income over the costs of investing them.

IOLTA participation remains voluntary for financial institutions; however, lawyers may not keep an IOLTA account at an institution that does not participate or meet IOLTA requirements. Virtually all banks and savings and loans in Michigan have participated in IOLTA since its inception in 1990. Most have waived all IOLTA account fees to make more charitable grant dollars available.

Nationally and in Michigan, IOLTA has provided important resources for nonprofit agencies providing civil legal aid to the poor and for projects that improve the administration of justice. However, recent historically-low interest rates have reduced IOLTA revenue for grants. Ms. Rexer said “We are grateful to the Michigan Supreme Court for updating the rate parity requirements which can assist with much-needed income for these important charitable purposes.”

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