The Legal Services Trust Fund Program receives interest on attorney-client trust accounts and distributes those funds to approximately 100 nonprofit legal aid organizations that provide free legal services in civil matters to indigent Californians.

The program is guided by the Legal Services Trust Fund Commission.

Lawyers who handle small amounts of money for their clients, or money that is held for a short period of time, must participate in the program by depositing these funds into an Interest on Lawyers’ Trust Account (IOLTA). (When lawyers hold funds from one client that are large enough or held for a long enough period to earn interest for that client, the funds are segregated so that the client receives the interest.)

Resources for attorneys about opening and maintaining an attorney-client trust account are available at Guidelines for Attorneys.

Effective January 1, 2008, state law requires California lawyers to place IOLTA accounts only at eligible financial institutions. To be eligible, financial institutions must pay dividends or interest rates to IOLTA customers that are “comparable” to what they pay their similarly situated non-IOLTA customers. For information about the new law, refer to FAQs about IOLTA “Comparability”

Through the years, many financial institutions have taken a leadership role by increasing rates and reducing or waiving fees on IOLTA accounts. The generosity of these banks has increased access to justice for hundreds of thousands of adults and children who otherwise would have nowhere to turn for help.

AB 1723 - "Comparability" Legislation

When the IOLTA program was created over 25 years ago, interest-bearing checking accounts were the only bank products thought suitable for lawyers’ trust accounts. In the intervening years, banks have introduced new products that still provide safety and liquidity for clients but at a much greater return.

In response, in the 2007 legislative session, the Assembly Judiciary Committee chaired by Assemblyman Dave Jones introduced AB 1723. The bill was enacted and California joined 15 states that have adopted rules expanding the range of products available for IOLTA accounts.

Because the law also requires that financial institutions pay a rate of return or dividends on IOLTA accounts comparable to what they pay their similarly situated non-IOLTA customers, AB 1723 is often called the “Comparability” bill. See the Frequently Asked Questions (FAQs) below for more information on how this new legislation affects IOLTA accounts.

• IOLTA "Comparability" FAQs