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FDIC Insurance Coverage to Change for IOLTA (COLTAF) and Non-Interest-Bearing Accounts

As of Jan. 1, 2013, FDIC insurance available to IOLTA accounts will be $250,000 per owner of the funds (client), per financial institution, assuming that the account is properly designated as a trust account and proper accounting of each client’s funds is maintained. Non-interest-bearing trust accounts will have this same level of coverage.

For the past two years, IOLTA and non-interest-bearing accounts enjoyed unlimited FDIC insurance coverage pursuant to Section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. That provision was to be effective for two years with a sunset date of Dec. 31, 2012.

Although there have been attempts in Congress to extend that coverage for an additional two years, and the American Bar Association and others have lobbied for that extension, those efforts have not been successful due largely to legislative maneuvering that was unrelated to the merits of the issue.

Lawyers may want to put something in their fee agreements which lets their clients know in which financial institution the lawyer has his or her trust account.  As an example, suppose a lawyer is holding $10,000 for Client A in the lawyer's trust account at Wells Fargo Bank.  Client A may also have other funds at Wells Fargo.  If so, the $10,000 being held by the lawyer will count toward the $250,000 per individual per financial institution.  A lawyer holding a large amount of money for a client should exercise good judgment in choosing a bank that is more likely to remain solvent.

Further information on FDIC insurance coverage for IOLTA and other accounts as of Jan. 1, 2013, is at