An IOLTA account is a special checking account held by a lawyer or law firm, not by you
An IOLTA account (Interest on Lawyer Trust Account) is a checking account that holds your money temporarily while a lawyer is working on your case. The lawyer opens and controls the account in their name, but the money inside belongs to you. You do not write checks from it, and you do not receive statements for it — the lawyer does.
IOLTA accounts exist because lawyers sometimes need to hold client money for a short time. If you are settling a lawsuit, your lawyer might hold the settlement payment for a few days before distributing it to you. If you are buying a house, your lawyer might hold your down payment until closing day. The account keeps that money separate from the law firm's own operating funds, which protects you if the firm has financial trouble.
The account is checking, not savings, because the money needs to move in and out quickly. A lawyer cannot predict exactly when a settlement will arrive or when a closing will happen, so they need when ready access without withdrawal penalties or waiting periods.
Key Takeaways
- An IOLTA account is opened and managed by a lawyer or law firm, and the money in it belongs to you even though you do not control the account.
- IOLTA accounts are checking accounts because lawyers need to move money in and out on short notice, not hold it for months.
- You will not receive a statement for an IOLTA account — your lawyer provides accounting of the funds and tells you when money is being released to you.
- The rules for IOLTA accounts are set by your state bar association to protect client money from being mixed with law firm money.
Why lawyers use IOLTA instead of their regular business account
A law firm's regular checking account is for paying staff, rent, and office supplies — the firm's own expenses. Client money cannot go there because if the firm runs into debt or bankruptcy, creditors could seize that account and your money would be caught in the middle.
IOLTA accounts are protected by state law. The money in them is legally yours, and a law firm's creditors have no claim to it. This separation is the entire reason IOLTA exists. Your lawyer is required to keep client funds in a separate account, and that account must follow specific rules about how money moves in and out.
Some IOLTA accounts earn a small amount of interest, which the law firm donates to legal aid organizations in your state. You do not receive that interest — it goes to help people who cannot afford lawyers. This is why the account has "Interest on Lawyer Trust Account" in its name.
How money moves in and out of an IOLTA account
When you give your lawyer money — for a retainer, a down payment, or settlement funds — they deposit it into the IOLTA account in your name. The lawyer keeps a record of how much belongs to you and when it arrived. You should receive a written accounting of this, though the format varies by state and by law firm.
When your case closes or your transaction completes, your lawyer withdraws the money from the IOLTA account and either gives it to you directly or sends it where it needs to go. If you are buying a house, the money goes to the title company at closing. If you are settling a lawsuit, it might go to medical providers, creditors, or to you as your share of the settlement.
You cannot withdraw money from an IOLTA account yourself. You have no access to it and no way to write checks against it. Your lawyer controls all movement of the funds. This is why it is important to ask your lawyer for a written summary of what is in the account and when you should expect to receive your money.
The difference between IOLTA and a personal checking account
| Feature | IOLTA Account | Your Personal Checking |
|---|---|---|
| Who opens it | Your lawyer or law firm | You |
| Whose name is on it | The lawyer's name, held in trust for you | Your name |
| Who controls withdrawals | The lawyer only | You |
| Who receives statements | The lawyer | You |
| How long money stays | Days to weeks, usually | As long as you want |
| What happens if the bank fails | Your money is protected by state law and separate from the firm's assets | Your money is insured by FDIC up to $250,000 |
What to ask your lawyer about IOLTA accounts
Before your lawyer puts money into an IOLTA account, ask for a written explanation of what will happen to it and when you will receive it. Ask how often you will get updates about the account balance. Ask what happens if the case takes longer than expected — will your money stay in the account, and will you be charged fees?
Request a written accounting at the end of your case showing how much was deposited, when it was withdrawn, and where it went. This is your record of the transaction and protects you if there is ever a dispute about the money. Keep this document with your case file.
If you are uncomfortable with your money sitting in an account you cannot access, discuss this with your lawyer. In some situations, alternatives exist — for example, you might be able to hold funds yourself until a specific date, or the other party might hold them instead. Your lawyer can explain what is possible in your situation.
When you might encounter an IOLTA account
Real estate transactions are the most common reason you will deal with an IOLTA account. Your down payment, earnest money, or closing costs often sit in an IOLTA account for days or weeks before closing. The title company or your lawyer's office holds this money to make sure both buyer and seller are protected.
Personal injury or accident settlements frequently use IOLTA accounts. If you are settling a lawsuit, your lawyer may hold the settlement check in an IOLTA account while they pay off medical bills, liens, or other debts from your settlement. You receive what is left after those payments.
Divorce cases, probate cases, and other legal matters that involve money often use IOLTA accounts. Any time a lawyer needs to hold client funds temporarily as part of their work, an IOLTA account is the legal way to do it.
Frequently Asked Questions
Can I withdraw money from an IOLTA account whenever I want?
No. Only your lawyer can withdraw money from an IOLTA account. You have no direct access to it. If you need the money before your case is finished, you must ask your lawyer to withdraw it and explain why you need it early.
Is my money safe in an IOLTA account if the law firm goes out of business?
Yes. IOLTA accounts are protected by state law specifically because of this risk. Your money is legally separate from the law firm's assets and cannot be seized by the firm's creditors. If the firm closes, your money is returned to you or held by the state bar until you claim it.
Will I earn interest on money in an IOLTA account?
Some IOLTA accounts earn a small amount of interest, but you do not receive it. The interest goes to legal aid organizations in your state. Your lawyer should tell you whether your account earns interest and where that money goes.
What if I disagree with my lawyer about money in the IOLTA account?
Ask your lawyer for a detailed written accounting of the account. If you believe there is an error, contact your state bar association's ethics hotline or client protection program. They can investigate disputes about client funds and help resolve them.
Is an IOLTA account the same as a trust account?
IOLTA is one type of trust account. All IOLTA accounts are trust accounts, but not all trust accounts are IOLTA accounts. The difference depends on whether the account earns interest and how the interest is used. Your lawyer can explain which type they are using for your money.