A rule that effectively requires financial institutions, as a matter of fairness, to pay interest on lawyers' trust accounts (IOLTA) at rates comparable to similar types of accounts was adopted Jan. 25 by the Illinois Supreme Court.

The amendments to Rule 1.15, which will take effect June 1, require lawyers and law firms to deposit nominal or short-term funds of clients or third parties in accounts at “eligible financial institutions.”

Such eligible insured banks and registered investment companies “shall maintain IOLTA accounts that pay the highest interest rate or dividend available … to its non-IOLTA account customers when (they) meet or exceed the same minimum balance or other account eligibility guidelines.”

Lawyers and firms that have IOLTA accounts do not need to take any action yet. During the interim until June 1, the Lawyers Trust Fund of Illinois will work closely with banks to ensure their compliance with the revised rule.

Illinois is the 11th state to adopt a comparability rule since 2002. Of the 10 Illinois banks with the largest number of IOLTA accounts – holding about half of the total - eight already comply with comparability rules in other states and are expected to follow suit in this state.

If the Lawyers Trust Fund (LTF) learns that a bank cannot comply, it will notify its IOLTA account holders so they can take appropriate action to maintain compliance.

The amended rule defines a range of new types of accounts that will qualify for IOLTA participation, including open-end money market funds and U.S. government securities, as long as money on deposit may be withdrawn on request.

The institutions will be directed by lawyers to remit monthly earnings and detailed statements to the LTF for each IOLTA account, preferably electronically.

A significant increase is expected in funds transferred by the banks to the LTF in support of legal aid - perhaps double the present rate of return, based on the experience in other states.

Additional revenue will help shore up statewide programs of legal assistance to low-income residents that have been losing ground for many years, an LTF statement pointed out.

Recent studies revealed that only 88 full-time legal aid attorneys exist in 101 counties, and that on average only one is available for every 4,758 civil legal problems that face low-income households.

The LTF uses IOLTA to “strengthen existing legal aid programs, invest in innovative service delivery strategies, and help rebuild the capacity of the legal aid system.”

Last June, the Lawyers Trust Fund reported that $5,987,310 would be distributed during fiscal 2007 to 32 agencies. The 32.7 percent increase was due to better cooperation by participating banks and more registered attorneys contributing $42 each per year.

See page 15 for details of increased legal assistance funding announced recently by the Illinois Equal Justice Foundation and the federal Legal Service Corp.