Hello everyone and welcome to this Ethics Alert blog which will discuss the scheduled expiration of the Dodd-Frank Deposit Insurance Provision on December 31, 2012 which would remove the unlimited deposit insurance coverage for Interest on Lawyer Trust Accounts (IOLTAs- called IOTA trust accounts in Florida) to fiduciary account coverage of $250,000.00 per client ledger within the lawyer’s trust account.
I recently received information advising of the expiration of the Dodd-Frank provision on 12/31/12 and a summary of the affect of the expiration of the provision from the FDIC website is below:
After December 31, 2012, funds deposited in IOLTAs will no longer be insured under the Dodd-Frank Deposit Insurance Provision. However, because IOLTAs are fiduciary accounts, they generally qualify for pass-through coverage on a per-client basis. FDIC regulations provide that deposit accounts owned by one party but held in a fiduciary capacity by another party are eligible for pass-through deposit insurance coverage if (1) the deposit account records generally indicate the account’s custodial or fiduciary nature and (2) the details of the relationship and the interests of other parties in the account are ascertainable from the deposit account records or from records maintained in good faith and in the regular course of business by the depositor or by some person or entity that maintains such records for the depositor.
If an IOLTA does qualify for pass-through coverage as a fiduciary account, then each separate client for whom a law firm holds funds in an IOLTA may be insured up to $250,000.00 for his or her funds. For example, if a law firm maintains an IOLTA with $250,000.00 attributable to Client A, $150,000.00 to Client B, and $75,000.00 to Client C, the account would be fully insured if the IOLTA meets the requirements for pass-through coverage. If the clients have other funds at the same IDI, those funds would be added to their respective shares of the funds in the IOLTA for insurance coverage purposes.
The website and an FAQ excerpt from 11/9/12 are here: https://www.fdic.gov/deposit/deposits/unlimited/expiration.html and https://www.fdic.gov/news/news/financial/2012/fil12045.html.
Bottom line: If this will affect your practice and your IOTA trust account, you should plan accordingly before 12/31/12 and you can also contact your U.S. Representatives and Senators.
Be careful out there!
Disclaimer: this e-mail does not contain any legal advice and the comments herein should not be relied upon by anyone who reads it.
Joseph A. Corsmeier, Esquire
Law Office of Joseph A. Corsmeier, P.A.
2454 McMullen Booth Road, Suite 431
Clearwater, Florida 33759
Office (727) 799-1688
Fax (727) 799-1670