Can a lawyer send the interest from a pooled client trust account (IOLTA) to a law-related charity of the lawyer's choice instead of the Utah Bar Foundation?

Plain-English summary

Opinion 96-05 addressed whether a lawyer may choose a law-related charitable institution other than the Utah Bar Foundation to receive the interest generated, in nominal amounts, on pooled client trust funds that are impractical to pay to individual clients. The Committee concluded that the lawyer may not, because the Utah Supreme Court's approval of the Bar's "interest on lawyers' trust accounts" (IOLTA) program was specifically limited to the Bar's original proposal to dedicate those small interest amounts to the Utah Bar Foundation.

The Committee explained the background: lawyers may not take for their own purposes the interest on clients' trust funds, so before IOLTA, nominal-interest funds were held in non-interest-bearing accounts to ensure the lawyer received no benefit. In 1983 the Bar petitioned the Utah Supreme Court to implement an IOLTA program, and the Court approved it in In re Interest on Lawyers' Trust Accounts as a single exception to the general rule of Rule 1.15, authorizing interest on nominal, short-held client funds to be paid to the Utah Bar Foundation.

The Committee treated that authorization as a single, specific exception rather than a blanket or generic one. If an individual lawyer could choose a different law-related charity, the lawyer would be exercising a measure of control over the earned interest, which would amount to receiving a personal benefit that the ethical rules prohibit. The Committee therefore concluded that, to avoid violating Rule 1.15, a lawyer would need to obtain specific Supreme Court approval of any proposal to remit trust-account interest to another charity.

Currency note

This opinion was issued in 1996, before the Utah State Bar's adoption of the 2005 revisions to the Rules of Professional Conduct (the Ethics 2000-based amendments approved by the Utah Supreme Court on September 29, 2005). Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer pick a different charity for IOLTA interest?

A: No. The opinion concluded that the Supreme Court's IOLTA approval is limited to the Utah Bar Foundation, so remitting the interest to a different charity would violate Rule 1.15 unless the Court specifically authorizes another recipient.

Q: Why would choosing the charity be an ethics problem?

A: Because it implies control over the funds. The opinion reasoned that a lawyer who selects a different recipient exercises a measure of control over the earned interest, which amounts to receiving a personal benefit the ethical rules prohibit.

Q: Is there any way for a lawyer to direct the interest elsewhere?

A: Only with the Court's approval. The opinion stated the lawyer would need to obtain specific Supreme Court approval of a proposal to remit trust-account interest to another charity.

Background and rules framework

The opinion interpreted Utah Rule of Professional Conduct 1.15 (safekeeping property, Model Rule 1.15), under which lawyers may not receive for their own purposes the interest on client funds held in trust. The analysis turned on the scope of the Utah Supreme Court's IOLTA order in In re Interest on Lawyers' Trust Accounts, which the Committee read as a single exception directing nominal interest to the Utah Bar Foundation, not a general license for lawyers to choose alternative recipients.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.15 / Utah Rule 1.15 (safekeeping property; client trust funds)

Cases:

• In re Interest on Lawyers' Trust Accounts, 672 P.2d 406 (Utah 1983), establishing the Utah IOLTA program

Other opinions cited:

• Utah Ethics Advisory Op. No. 64 (1979): interest on client trust funds belongs to the client

See also

• DC Bar Op. 251: Safekeeping Settlement Proceeds Claimed by a Third Person
• Ill. Ethics Op. 15-02: Disposition of Unclaimed and Unidentified Client Funds
• Ala Ethics Op. 2008-03: Lawyers' Trust Account Obligations
• Utah Ethics Op. 12-02: Flat-Fee Agreements and Trust Accounting

Source

• Landing page: https://www.utahbar.org/ethics-opinions/1996-05/
• Original PDF: https://www.utahbar.org/wp-content/uploads/2022/12/1996-05.pdf

Original opinion text

Reproduced from the official source for research purposes. The two-column PDF has been reassembled into reading order by paragraph; the linked source is authoritative.

Utah Ethics Opinions 1996. 96-05. USB EAOC Opinion No. 96-05

Utah State Bar Ethics Advisory Opinion Committee

Opinion No. 96-05 Approved July 3, 1996

Issue: May a lawyer choose a law-related charitable institution other than the Utah Bar Foundation to be the recipient of trust-account interest that is generated in such nominal amounts that it is impractical to pay them to individual clients?

Opinion: Because the Utah Supreme Court's approval of the Utah State Bar's "interest on lawyers' trust accounts" (IOLTA) program is specifically limited to the Bar's original proposal to dedicate small-interest amounts to the Utah State Bar Foundation, a lawyer who remits interest to a different charitable institution would violate Rule 1.15 of the Utah Rules of Professional Conduct unless the Court specifically authorizes another recipient.

Discussion: It is well established that lawyers may not receive for their own purposes interest on clients' funds that are held in trust for the clients. (fn1) Due to difficulties in accounting for and assigning interest payable to clients for small deposits and short deposit times, lawyers traditionally kept such funds in non-interest-bearing accounts.

The only institutions profiting by this arrangement were the financial institutions holding the funds. Accordingly, in 1983 the Utah State Bar petitioned the Utah Supreme Court to implement an IOLTA program to permit lawyers to accrue interest on clients' trust funds that were otherwise impractical to account for and to remit those monies to the Utah Bar Foundation.

The Utah Supreme Court approved the program in In re Interest on Lawyers' Trust Accounts. (fn2) Prior to this order of the Court, any interest earned on monies deposited in lawyers' trust accounts had to be paid to the clients whose funds had generated the interest. There were no exceptions, even for small amounts that would require major accounting and allocation efforts. (fn3)

In the absence of such accounting, the funds had to be held in non-interest-bearing accounts, so that the lawyer would not be the beneficiary of any interest, both under the Code of Professional Responsibility (before 1988) and the Rules of Professional Conduct (after 1987).

The Supreme Court has provided a singular exception to this general rule by authorizing the Utah State Bar to implement a voluntary IOLTA program, under which clients' funds that are nominal in amount and expected to be held for a short period of time can be channeled to an interest-bearing account, with interest payable to the Utah State Bar Foundation.

The Ethics Advisory Opinion Committee believes that the Supreme Court's authorization is for a single exception to the general principle of Rule 1.15 and has not provided a blanket or generic exception to the rule. If an individual lawyer were to have the ability to choose a law-related charitable institution other than one designated by the Supreme Court, then that individual lawyer would be exercising a measure of control over the earned interest. Such an exercise of control would amount to the receipt of a personal benefit by the lawyer, which the ethical rules prohibit. Accordingly, the Committee concludes that, in order to avoid a violation of Rule 1.15, a lawyer would need to obtain specific Supreme Court approval of a proposal to remit trust-account interest to another charity.

Footnotes

1. In re Interest on Lawyers' Trust Accounts, 672 P.2d 406, 407 (Utah 1983). See also Utah Rules of Professional Conduct 1.15(b) [renumbered from 1.13(b) in 1995].

2. 672 P.2d 406 (Utah 1983).

3. See, e.g., Utah Ethics Advisory Op. No. 64 (1979).

Rule Cited: 1.15