Does a client trust account need to generate interest?

Misbah Jalal Siddiqui

Does a client trust account need to generate interest?

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Trust Accounting Interest

Certain states require that client funds only be placed in accounts that generate interest[1]. Typically trust accounts, whether IOLTA or individual trust accounts generate interest.  The primary difference lies in where the interest goes.

With IOLTA accounts, interest goes to a state foundation for the purposes of providing legal aid to those who would not be able to otherwise afford it.

With individual interest-bearing trust accounts, the interest would go to the client.

While every state has an IOLTA program, using these types of trust accounts is not mandatory in all of them. For those where it is mandatory, a common method of deciding which account type to use is to determine whether or not the interest earned for the client would be worth the cost of opening and maintaining the account. The costs would include not only bank charges, but also possibly fees for the firm’s time in setting up the account[2].

At no point should an attorney hold onto interest earned from client funds. The interest amount should either be given to the client or the appropriate state IOLTA foundation.


1. IOLTA Basics: Lawyers Trust Fund of Illinois
2. Managing Client Trust Accounts

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