IOLTAs and NOW accounts

Posted By: Marmaduchess

IOLTAs and NOW accounts - 02/07/13 09:40 PM

Are IOLTAs eligible to maintain NOW accounts? Kind of confused. State government or not?

Thanks everyone!
Posted By: John Burnett

Re: IOLTAs and NOW accounts - 02/07/13 09:47 PM

If they are state-mandated IOLTAs for which the interest is paid to a state agency or state-designated non-profit that funds legal services for indigent folks, they may have a NOW account. Otherwise, they aren't technically an IOLTA.

A law firm theoretically can have an interest-bearing demand deposit account (if you offer them), but state ethics laws or rules may not allow them to earn interest on clients' funds.
Posted By: Marmaduchess

Re: IOLTAs and NOW accounts - 02/07/13 09:56 PM

In Colorado, the interest does go to non-profits so I think we are OK to have our COLTAFs (as they are known) in NOW accounts. Thank you so much John. I can scratch that off my Reg D audit list.
Posted By: cbinder63

Re: IOLTAs and NOW accounts - 02/07/13 11:00 PM

COLTAF accounts are setup as interest bearing. IRS reporting is under COLTAF's Tax Id Number. The interest is remitted by the bank to COLTAF per agreement.