IOLTA Accounts

Interest-bearing checking accounts designed specifically for IOLTA and individual escrow needs.

IOLTA & Escrow Business Checking

IOLTA Accounts

An Interest on Lawyer Trust Account (IOLTA) is a focused interest-bearing account to address the needs of our legal partners.

  • Legal firms frequently handle their client's money, ranging from court fees and medical payments to settlement checks. When the amount of money held for an individual client is substantial, the funds are placed in an interest-bearing trust account.  When lawyers hold applicable client funds, they should look to follow the governing Trust and IOLTA rules based on their state bar association.
  • Any interest earned on this account, in excess of deposit fees associated with the account, will be submitted by the bank to the legal bar association in your state.  The interest from IOLTA accounts provides legal aid to low income individuals and aids in criminal justice system improvement.  We work with the following states;
    • Virginia
    • North Carolina
    • South Carolina
  • Effective July 1, 2022, the state of Virginia will require that any client managed funds be placed into an IOLTA. All law firms have at least one year to make the transition.
IOLTA Account Benefits

Offers a great way to fund legal public service programs for underrepresented individuals.

  • An IOLTA is not taxable to the legal firm or their client.
  • The interest earned on IOLTA accounts, assists with community education and promotion of legal justice availability along with civic responsibility for all individuals.

Escrow Accounts

A specialized account designed to simplify and secure your legal arrangement of funds until all agreed upon conditions have been met by all parties involved.  A TowneBank Escrow Account can help your business in addressing mergers, acquisitions, litigation, collateral, and security deposits along with making sure you have the right controls and security procedures in place to help you reduce your transaction risks for your business needs.

Escrow Account Benefits
  • Offers peace of mind by leveraging key validations and protection for your business
  • Provides flexibility to solve for a variety of needs
  • Assists with the management and deployment of funds for your clients


  • IOLTA stands for "Interest on Lawyers' Trust Account". Some states such as a Virginia and North Caroline, require that attorneys who handle client funds, including settelment checks, fees advanced for services not yet performed or, money to pay court fees, deposit the funds in one or more clearly identifiable trust accounts. All funds received or held for the benefit of clients by a member or law firm, including advances for costs and expenses, shall be deposited in one or more identifiable bank accounts labeled "Trust Account," "Client's Funds Account" or similar. If the amount is large or the funds are to be held for a long period of time, the attorney must place the money at interest for the benefit of the client. However, if the client funds are not capable of earning income for the client in excess of the costs of securing such income, including staff time and expenses to segragate those amounts, then they are pooled in a single account with simliar funds of other clients. In states that don't require attorneys to manage client funds in IOLTA accounts, funds can be deposited into non-interest bearing check accounts. Currently under rules and/or statues in every state, an attorney may or must pool nominal or short-term client funds in an interest-bearing account.
  • States that have authorized the IOLTA program are responding to the need for increased access to civil legal representation by legal aid programs for constituents whose incomes fall below the poverty level. The charitable purposes of the IOLTA program are:
    (a) To provide legal assistance to the poor;
    (b) To provide student loans, grants, and/or scholarships to deserving law students;
    (c) To improve the administration of justice; and
    (d) For such other programs for the benefit of the public as are specifically approved.
  • Yes, TowneBank offers IOLTA accounts in Virginia, North Carolina and South Carolina. You can learn more about our offering here.
  • Under the Supreme Judicial Court's Interest on Lawyers' Trust Accounts (IOLTA) program, lawyers holding funds on behalf of a client must place the funds either in an account which pays interest to the client or in an IOLTA account. An IOLTA account may be selected if the funds are relatively nominal or will be held by the lawyer for only a short time. In either of these situations, the interest earned for the client above the applicable cost of establishing and maintaining an account for the benefit of the client are sent to the state bar. Although each IOLTA deposit may earn very small amount of interest, the pooled IOLTA accounts accumulate enough interest to make a substantial contribution to improving the administration of justice and to providing civil legal services to individuals who cannot afford to hire a lawyer.
  • North Carolina and Virginia are among 47 jurisdictions (including Washington D.C.) to require IOLTA program participation.
  • The new rule, effective July 1, 2022, makes participation in IOLTA by lawyers and law firms mandatory in Virginia. Lawyers holding IOLTA eligible funds may no longer "opt-out" of the program as they were previously able to do. The rules also define institutions "eligible" to hold IOLTAs as only those banks which have IOLTA programs approved by the applicable state bar.
  • An escrow account is a specialized account designed to simplify and secure legal arrangement of funds. They are often associated with mortgages but they can also be used in addressing mergers, litigation, collateral and more. An IOLTA account, or Interest on Lawyer Trust Account, is a focused interest-bearing account that allows a law form to handle nominal or short-term funds and the interest earned on these accounts is remitted to the state IOLTA program for charitable purposes.
  • IOLTA accounts are savings accounts or an operating account.
  • Yes, IOLTA accounts are interest-bearing; however, any interest earned on the account, in excess of deposit fees, are submitted by the bank to the legal bar association in your state. The interest from IOLTA accounts are used for charitable purposes by your state.
  • Yes. The FDIC provides unlimited insurance coverage for funds in IOLTAs up to $250,000 per client whose funds are held in the pooled trust account.
  • Client trust funds that do not meet the "nominal" or "short term" requirements of an IOLTA should be deposited in a separate client trust account to earn interest for the benefit of the individual client. The attorney must exercise her/his independent judgment in assessing whether opening a separate interest-bearing account on behalf of a particular client will provide income for the client after considering the amount of interest that will be earned versus the costs of maintaining the separate account including the fees and charges that might be associated with it and the administrative cost to the lawyer or law firm The attorney can contact their applicable start bar association to get further clarity on the rules to determine if they should deposit client funds into an IOLTA or trust account.
  • There are no tax consequences to the client, attorney, or law firm. No one will pay any taxes on this money. The IRS has ruled that the interest generated on these accounts is not taxable to the lawyer, law firm, or client. Any lawyer who receives a 1099 for interest earned on the IOLTA account should contact the IOLTA Committee immediately to reconcile the problem. Financial institutions are instructed to report the income to the IRS as received by the IOLTA Committee. Attorneys have no tax withholding or reporting responsibilities as to the interest earned on IOLTA accounts.
  • While each lawyer is required to comply with the IOLTA rule, laywers who practice in a firm may meet those requirements using a shared, law firm IOLTA. Each lawyer at a firm is not required to maintain a separate account solely for his or her own clients.
  • In every state, there are designated organizations that will help to distribute funds to the appropriate groups. For example, in Virginia, The Legal Services Corporation of Virginia distributes the funds to legal aid programs to provide civil legal assistance to low-income Virginians.
  • No. Lawyers may continue to use their checks as they did prior to establishing the account, if the financial institution converts it to an IOLTA that meets the requirements of the Rules.
  • A financial institutions may charge reasonable handling fees for the maintenance and remittance of IOLTA funds. Service charges and handling fees for IOLTA accounts are deductible solely from the interest earned. Some firms may require additional services that have charges and/or fees that are not applicable to be offset against the IOLTA account interest dividends. Other fees and charges, such as check printing charges, funds transfers, etc., are considered ordinary business expenses of the attorney or law firm. These are fees would need to be charge to another non-IOLTA account in which the lawyer or law firm can pass on to their clients
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