MISSOURI'S NEW IOLTA

On August 21, 2007, the Supreme Court of Missouri adopted substantial changes to their Rule 4-1.15 which governs lawyers' trust accounts. This amended Rule will take effect January 1, 2008. Prior to these changes, the Rule permitted lawyers to "opt-out" of having their respective trust accounts being IOLTA accounts. IOLTA accounts are those accounts where the interest earned on funds would not be sufficient to generate any net income to the client. This income is collected and pooled with other such income and distributed to provide legal services to the poor and other law related services. Prior to this Rule change, approximately 94% of Missouri lawyers and law firms maintained their trust accounts as IOLTA accounts. One change adopted by the Court was to amend the rule from "opt-out" to make it comprehensive that all such accounts be IOLTA accounts. Although this change will affect a relatively small number of lawyers and law firms in our state, it is significant.

An additional change to the Rule requires that the IOLTA account only be at financial institutions which have been declared as "eligible financial institutions" by the IOLTA Foundation [Missouri Lawyer Trust Account Foundation]. The main requirement for an institution to be eligible is that it pays interest rates on IOLTA accounts which are "comparable" to the interest rates it pays on the same type of account of non-IOLTA customers. Previously, some institutions paid substantially lower rates on their IOLTA accounts than they were paying other customers with the same account profile. This will no longer be possible as the financial institution will need to pay comparable rates if it is to be listed as an eligible institution. This seems to be only fair.

In addition, eligible financial institutions are ones that structure their fees and costs so as to comply with the new Rule and not punish any IOLTA account with the burden of extraordinary costs.

Missouri is not the first state to adopt this structure of their IOLTA Rule.To date there are 33 states which have comprehensive participation by lawyers and 14 of those states have the comparability requirement for financial institutions. The empirical evidence from these other states, including our sister state of Illinois, is that this system works very well. Many institutions have proudly become part of the justice team by assisting in the creation and maintenance of these accounts.

Our justice system is very complex. If it were not, then the public would not need lawyers to assist them through its labyrinth of requirements and protections. Our society, and especially the legal community, perceived long ago that it was unjust to impose this complex system on those ignorant of it and unassisted in it. We believe that it is our obligation to educate the public in the meaning and use of the law and also to provide assistance to those embroiled in it but who are too poor to obtain that assistance on their own. The funds created by these IOLTA programs assist in meeting these obligations and not by taxation of the public or the legal community but by the obtaining of a fair return on otherwise idle funds.