On June 10, 2010, the Delaware Supreme Court entered an order amending Rule 1.15 of the Delaware Lawyers’ Rules Of Professional Conduct, as it relates to its IOLTA (Interest On Lawyer Trust Accounts) program to make participation in the IOLTA program mandatory and to require that IOLTA funds be maintained in financial institutions that provide so-called “interest rate comparability” to IOLTA accounts. Interest rate comparability means that the interest rate payable by financial institutions for IOLTA accounts must be comparable to rates paid by the same institution on its other accounts with similar attributes. The Court took this action upon the recommendation of the Court’s Advisory Committee on Interest On Lawyer Trust Accounts Program (the “IOLTA Committee”) and the Delaware Bar Foundation following a year-long process of multiple meetings with numerous Delaware lawyers and bankers.
Delaware is the 43rd jurisdiction to convert its IOLTA program from opt‑out to mandatory status and the 33nd jurisdiction to adopt interest rate comparability.
The Court has amended Rule 1.15 to mandate that lawyers who hold IOLTA-eligible funds maintain all those funds in IOLTA accounts. Participation by Delaware lawyers is now required, not optional, with a limited ability of the Bar Foundation to exempt accounts which can not be expected to generate enough interest to cover certain account fees. Existing pooled trust accounts, as well as newly-opened pooled trust accounts, must now be held as IOLTA accounts. In addition, IOLTA accounts may only be maintained at “eligible” financial institutions (i.e., those which offer interest rate comparable IOLTA accounts). As the Court’s designated administrator of the IOLTA Program, the Delaware Bar Foundation will maintain a list of those financial institutions that are eligible to hold IOLTA accounts. The list of eligible financial institutions can be downloaded from the IOLTA page of this website.
If you/your law firm already place appropriate funds in an IOLTA-participating account at an eligible financial institution, no action is necessary. Should your financial institution elect not to continue to participate in the IOLTA Program, you/your law firm will have to open new IOLTA accounts at an eligible financial institution.
If you/your law firm plans to open a new IOLTA account, Rule 1.15(h) requires that you complete and submit a copy of the Notice to Financial Institutions Form (one for each account – copies are acceptable) to the Bar Foundation and retain a copy of the completed form for your records.
If you/your firm maintain pooled trust accounts that do not currently participate in IOLTA, you must complete the Notice To Financial Institutions Form (see above), and visit your bank to enroll the non-IOLTA pooled trust/escrow account(s) in the IOLTA Program. You may also use the form to open any new IOLTA account(s). Alternatively, you may apply for an exemption from the IOLTA Program by filing a letter of Request for Exemption to the Foundation.
An exemption from participation in the IOLTA Program is only available for accounts that: 1) are open at a financial institution which has not elected to waive allowable reasonable service charges and fees as that term is defined in Rule 1.15; 2) have not earned any interest in excess of fees for the preceding 12 consecutive months, and 3) would create a hardship if required to remain in the IOLTA Program. A written request for exemption must include: 1) a written statement or account analysis, preferably from the financial institution, that demonstrates that allowable reasonable service charges and fees have exceeded the interest earned on the account for the preceding 12 consecutive months; and 2) a written explanation that demonstrates the hardship that would be incurred. The written statement should indicate the name of the financial institution and the average daily balance of each of the attorney’s/firm’s pooled trust/escrow accounts (for which exemption is sought) for the immediately preceding twelve calendar months. Note: the computation of the average daily balance should comport with that which the bank uses to compute interest earnings.
Questions regarding a determination whether your client funds should be maintained in a pooled trust/escrow account may be directed to the Office of Disciplinary Counsel. Additionally, certain lawyers, including those not in private practice, are exempt from IOLTA. If you have questions about your status, please contact the Office of Disciplinary Counsel.
In its first 26 years, the IOLTA Program awarded almost $23,000,000 in grants to Delaware’s Legal Services providers, including Community Legal Aid Society, Inc, Delaware Volunteer Legal Services, Inc. and Legal Services Corporation of Delaware. The Supreme Court’s amendment of the Rules that govern the program ensures that IOLTA will generate the maximum possible benefit for these organizations which serve Delaware’s neediest citizens.