NOTE: Updated information in bold
Many law firms maintain Interest on Lawyers Trust Accounts (IOLTA) on behalf of their clients.
Through December 31, 2010, these accounts receive unlimited FDIC insurance coverage if held at financial institutions participating in the FDIC’s Transaction Account Guarantee (TAG) Program.
The TAG program provided full coverage of non-interest bearing deposit transaction accounts, regardless of dollar amount through December 31, 2009, and extended through December 31, 2010.
The category of non-interest bearing transaction accounts included IOLTA and functionally equivalent accounts, and provided for unlimited insurance for such accounts held in participating financial institutions.
The Dodd Frank Wall Street Reform and Consumer Protection Act was signed into law in July 2010. This law extended unlimited FDIC insurance for non-interest bearing accounts until December 31, 2012; however, it inadvertently did not extend that coverage to IOLTA accounts.
In order for the unlimited FDIC insurance coverage of IOLTA accounts to continue uninterrupted, Congress must act by the end of the year. If it does not, each client will be eligible for $250,000 in FDIC insurance coverage (at an FDIC insured financial institution) which would include the amount held in the IOLTA account for that client and the amounts contained in other accounts, if any, held by the client at that financial institution.
On December 29, 2010, President Obama signed into law legislation (H.R. 6398) that extends unlimited FDIC insurance for IOLTA accounts through December 31, 2012. The House of Representatives passed this legislation on November 29, 2010, and the Senate passed it by unanimous consent on December 22, 2010.
Under U.S. Treasury Department guidelines, we hereby inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used by you for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service, or for the purpose of promoting, marketing or recommending to another party any transaction or matter addressed within this tax advice. Further, RubinBrown LLP imposes no limitation on any recipient of this tax advice on the disclosure of the tax treatment or tax strategies or tax structuring described herein.
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