Escrow Accounts, IOLA and Ethics

What Every Attorney Needs to Know about Escrow Accounts, IOLA, and Ethics

Handling attorney trust accounts is a large part of the practice of law in New York. Statewide, attorneys maintain over 48,000 IOLA accounts in approximately 200 banking institutions. Every New York lawyer who handles client funds must maintain an IOLA account. Lawyers must use an IOLA account for qualifying funds, unless he or she uses an account that will generate compute and pay net interest to the client (net of all bank fees and the lawyer's or law-firms related services). A New York lawyer may not place qualifying funds in a non-interest bearing account.

Register Online for the upcoming March MCLE program on Attorney Escrow Accounts.

Attorney Escrow Accounts - Rules, Regulations and Related Topics
4.0 MCLE Credits
Friday, March 21, 2014 | 9:00 a.m. - 12:45 p.m.

The new YOrk Interest on Lawyer Account Fund ("IOLA")

The New York State Interest on Lawyer Account Fund ("IOLA") helps low income people in New York State obtain help with civil legal problems affecting their most basic needs, such as food, shelter, jobs and access to health care.  The IOLA program is a partnership of lawyers, banks and community organizations. It produces millions of dollars each year to finance legal aid for low income New Yorkers and improvements in the administration of justice throughout New York State.

Participation in New York's IOLA program is mandatory in two senses. First, every New York lawyer who handles client Funds must maintain an IOLA account. Second, the lawyer must use an IOLA account for qualifying funds, unless he or she uses an account that will generate compute and pay net interest to the client (net of all bank fees and the lawyer's or law-firms related services). A New York lawyer may not place qualifying funds in a non-interest bearing account. Interest earned on deposits held in IOLA accounts are remitted directly to the IOLA Fund by participating financial institutions. Further information is available at

Should you enroll?

If you are a lawyer who maintains a qualifying client trust account and have not yet opened an interest-bearing IOLA account for making nominal or short-term deposits, you should take steps to do so immediately.

Enrollment takes just two easy steps:

Step One: Open an IOLA account with a participating financial institution. Banks vary widely in terms of the "net yield" (interest rate less service fees) their IOLA accounts pay into the IOLA Fund. See the list of banks with rate and fee information here.

Step Two: Within 30 days of opening the IOLA account, submit the online Enrollment Form.

For more information about IOLA, visit    

Attorney Escrow Accounts—Rules, Regulations and Related Topics
Third Edition (with forms on CD)

Your "must have" book

Attorney Escrow Accounts, Third Edition is a handy reference for newly admitted and seasoned attorneys and their clients. It comprehensively covers the most common situations where attorneys handle client funds and clearly discusses the legal and ethics issues encountered in handling clients’ funds.

The Third Edition provides a revised and expanded discussion of related issues and updated case and statutory law, as well as a more comprehensive appendix featuring relevant statutes, rules and ethics opinions. This publication covers Handling of Escrow Funds by Attorneys, Escrow Agreements, The Interest on Lawyer Account Fund of the State of New York (IOLA) and the Lawyers’ Fund for Client Protection of the State of New York

Editor: Peter V. Coffey, Esq., Englert, Coffey, McHugh, & Fantauzzi, Schenectady, NY 
Assistant Editor: Anne Reynolds Copps, Esq., Law Office of Anne Reynolds Copps, Albany , NY

Key Benefits
• Learn how to prepare escrow agreements
• Know how to handle your clients’ funds legally and ethically

Attorney Escrow Accounts in New York  | MCLE PROGRAM

4.0 Ethics Credits | CLE Online, On Demand

This comprehensive program addresses the administration of attorney trust accounts – including IOLA accounts – and the rules governing the handling of funds in those accounts. Panelists provide an overview of the statutes and regulations governing escrow agreements, IOLA accounts, provisions of the General Business Law governing treatment of a buyer’s down payment in the purchase and sale of a home, as well as various ethics opinions and judicial decisions. Speakers provide an overview of IOLA’s laws and regulations including State Finance Law § 97-V, Judiciary Law § 497, Trustees’ Regulations (21 N.Y.C.R.R. Part 7000), the Rules of Professional Conduct (22 N.Y.C.R.R. Part 200, Rule 1.15) and the Dishonored Check Rule (22 N.Y.C.R.R. Part 1300). Registrants will learn more about the correct titling of IOLA accounts, missing clients, deceased attorneys and the designation of successor signatories.  The Lawyers’ Fund for Client Protection which reimburses clients for losses resulting from attorney thefts is also discussed.

- Includes a comprehensive review of the legal and ethical requirements pertaining to the handling of client funds
- Get practical and useful advice on how to avoid client complaints of misconduct and disciplinary proceedings.
- Develop an appropriate record-keeping system to administer and account for clients’ funds
- Understand IOLA, how to establish an account and when its use is required
- Learn more about the Lawyers’ Fund for Client Protection
- Get sample escrow agreements
- Earn 4.0 MCLE Ethics credits

For more information about the program, click here.

Cases, Rules and Ethics Opinions Related to Attorney Escrow Accounts 

Due to the fiduciary nature of the attorney-client relationship, an attorney must separate from his own properties and endeavor to keep those funds and other properties belonging to the client.
In re Le Pore, 43 A.D.2d 793 (4th Dep’t 1973). (Respondent commingled his client’s funds received from the real estate transaction with his own personal funds, drew a check or checks against his account for his use or for other clients, thereby reducing his bank balance below that required to pay his client, and issued a check to his client when his account had insufficient funds with which to honor it).

This is not merely an aspiration goal; any violation of the rules governing use of a client’s property will subject an attorney to discipline even if no actual loss occurred, and to personal liability in the event of loss of funds whether or not the attorney profited personally in any respect. In re Brown, 180 A.D.2d 150, 586 N.Y.S.2d 565, (N.Y. App. Div. 1st Dep’t 1992). (By commingling personal funds with client funds, respondent violated DR9-102(a) and 22 NYCRR § 603.15(a)).

As a basic protection, all funds of clients paid to a lawyer or law firm must be deposited in one or more identifiable bank accounts within the state of New York or elsewhere with the client’s written consent The only funds belonging to the lawyer or firm that may be deposited in those accounts are funds sufficient to pay bank service charges. 

The exceptions to the rule are money advanced for future costs and withdrawal of funds due and owing. However, if there is any dispute, the disputed portion must remain in the separate client account pending resolution of the controversy.