When Maine lawyers direct IOLTA interest to the Bar Foundation, who has the legal right to that interest?

Plain-English summary

The Maine State Bar Association asked whether the Maine Bar Foundation could be the sole beneficial recipient of interest from lawyers' pooled client trust accounts. The described IOLTA arrangement put in the pool only funds whose interest would not exceed the cost of separate interest bearing accounts. Clients retained their principal, while the participating lawyer and clients had no right to the pooled account's interest. A lawyer designated the foundation as the sole recipient of that interest for its charitable work.

The AG concluded that, under those stated arrangements, Maine law gave the foundation a legally protected right to all of the interest while it remained the designated beneficiary. The question mattered because the federal rule for the interest bearing checking accounts discussed in the letter required the entire beneficial interest to belong to natural persons or qualifying nonprofit organizations. The opinion addressed entitlement to interest, not ownership of the clients' principal.

Currency note

This opinion was issued in 1986. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: Did the opinion give the foundation ownership of clients' deposited money?
A: No. Its conclusion concerned interest earned on the pooled account. The request said clients retained a right to their principal.

Q: Could a participating lawyer take the account interest?
A: Not under the described arrangement. The opinion said neither participating lawyers nor clients were entitled to the interest once the foundation was designated as its sole recipient.

Q: Why did federal banking law matter to a Maine trust account?
A: The letter said the institutions covered by 12 U.S.C. § 1832 needed to know whether the account's entire beneficial interest belonged to a qualifying beneficiary before offering the described interest bearing accounts.

Background and statutory framework

Maine Bar Rule 3.6(f)(5), as described in the opinion, allowed pooled trust funds whose individual interest would be consumed by separate account costs, with the interest paid to an eligible nonprofit. The AG treated the foundation's exclusive designation as a protected beneficial interest under Maine trust law. The federal account rule supplied the reason the bar association needed that state law answer.

Citations

• 12 U.S.C. § 1832, the federal account provision identified in the opinion.
• Maine Bar Rule 3.6(f)(5), the pooled trust account rule described in the opinion.

Subject

Entitlement of the Maine Bar Foundation to entire beneficial interest in trust accounts established by Maine lawyers

Source

• Landing page: https://www.maine.gov/legis/lawlib/lldl/agops/agops.htm
• Original PDF: https://lldc.mainelegislature.org/Open/AG/Opinions/1986/ag_19860721.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

86-16

JAMES E. TIERNE\'
ATTORNEY GENERAL

STATE OF MAINE
DEPARTMENT OF THE ATTORNEY GENERAL
STATE HOUSE STATION 6
AUGVSTA, MAINE 04333

July 21, 1986

Mary L. Schendel
Maine State Bar Association
124 State Street
P.O. Box 788
Augusta, Maine 04330-0788
Dear Ms. Schendel:
You have inquired, on behalf of the Maine Bar Foundation, whether the Foundation is entitled, in Maine law, to the "entire beneficial interest" in trust accounts ("IOLTA accounts") established by Maine lawyers pursuant to Maine Bar Rule 3.6(f)(5), when it is named as the beneficiary of such accounts. The rule authorizes the commingling of funds held in trust by Maine lawyers so long as the interest from those commingled funds would not exceed the administrative costs of establishing separate interest bearing accounts for each trust, and so long as such interest is paid to an eligible non-profit corporation. For the reasons which follow, it is the Opinion of this Department that the Foundation, under the circumstances you describe, would in Maine law be entitled to the entire beneficial interest in the proceeds of IOLTA accounts. · The question you raise arises because, under Section 303 of the federal Consumer Checking Account Equity Act of 1980, certain enumerated financial institutions, consisting largely of state chartered or federally insured banks, are prohibited from establishing private interest bearing checking accounts ("NOW accounts") unless the "entire beneficial interest" thereof is held by natural persons or by non-profit organizations "operated primarily for religious, philanthropic, charitable, educational, or other similar purposes." 12 U.S.C.
§ 1832. Thus, financial institutions in Maine covered by this statute must be sure that non-profit charitable organizations such as the Maine Bar Foundation are legally entitled to the

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"entire beneficial interest" in the proceeds of trust accounts, such as IOLTA accounts, inuring to their benefit, before establishing NOW accounts for those organizations. Since the question of the legality of the entitlement of the Foundation to the interest from IOLTA accounts is one of state law, you have asked for our Opinion as to whether there is any restriction in Maine law to the Foundation's ability to compel payment of interest from IOLTA accounts to it.
In your letter requesting this Opinion, you set forth the circumstances under which IOLTA accounts will be established for the benefit of the Foundation.
Upon a lawyer's or law firm's designation of the Foundation as the recipient for IOLTA income, all interest earned on his or its IOLTA account will be remitted to the Foundation for its exclusive use in carrying out its three specified functions. Clients whose funds are deposited in any IOLTA account will have no claim or right to any interest earned on such funds, nor will they have any right to withdraw funds directly from an account.
Only the lawyer or law firm opening such account may withdraw funds therefrom, but even such lawyer or law firm will not be able to withdraw any earned interest.
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Thus, any interest that a client has in
an account is limited to that which such client would have if the funds had been deposited in a non-interest bearing checking account--a right to the principal sum only.
Neither clients nor the attorneys or law firms maintaining the accounts may receive any.interest earned on the accounts or receive any other direct or indirect pecuniary benefit from the deposit of clients funds into such accounts. Upon an attorney's or law firm's designation of the Foundation as the recipient for IOLTA income, the only beneficiary or recipient of any interest from the interest-bearing accounts is the Foundation.
It thus appears clear that no one - not the participating lawyers, nor any of their clients, nor anyone else - would be entitled under this scheme to the interest from the IOLTA accounts except the Foundation. The question thus becomes whether, in Maine law, a person designated as the sole beneficiary of the income accruing to a trust has a legally protected right to that interest. While it does not appear that this precise point has been the subject of any ruling of the Supreme Judicial Court of Maine, that Court has indicated that a person who has an unrestricted interest in the "benefit" C of a trust has an.ownership interest in that trust. Paine v.
Forsaith, 86 Me. 357 (1894). There is no reason to conclude that if the established beneficial interest were in something (such as the income from the trust) which was less than the entire trust, the Court would come to any different conclusion. Thus, this Department concludes that an exclusive designee of the interest of a trust has a legally protected right to that interest for as long as he remains so designated.
I hope this answers your question. Please feel free to reinguire if further clarification is necessary. rely,
<2 .17--
E. TIERNEY ney General
JET/ec cc: Howard H. Dana, Esq.

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