Because unlimited FDIC coverage for IOLTA accounts expired on December 31, the Ohio Legal Assistance Foundation learned this week that some attorneys may believe it necessary to break up IOLTA accounts so that they do not have more than $250,000 in an IOLTA account at any bank.

Beginning January 1, 2013, all types of trust accounts, including IOLTAs (Interest on Lawyer Trust Accounts), reverted to the standard maximum deposit insurance amount of $250,000.

The FDIC considers IOLTA accounts fiduciary in nature, which makes them eligible for pass-through coverage on a per-client basis. Each client's funds are insured up to $250,000 per IOLTA account, provided the FDIC's other requirements are met: the account's records must indicate generally the account is a custodial or fiduciary account, and the attorney-client relationship and deposit amount allocated to each client must be ascertainable from records kept in the regular course of business.

If the IOLTA account is properly maintained under the requirements of the Ohio Rules of Professional Conduct, FDIC coverage should available up to $250,000 per client, even if the total balance in the account exceeds $250,000.

“If attorneys are properly maintaining IOLTA accounts, the transition to standard maximum deposit insurance should be seamless,”  Foundation Executive Director Angela Lloyd said.  “The funds of each and every client will be protected to the maximum amount provided by the FDIC.”