Dodd-Frank deposit insurance provision which insures unlimited lawyer IOTA funds will expire on 12/31/12 unless renewed by Congress and funds will then qualify only as pass-through fiduciary funds up to $250,000.00 per client

Hello everyone and welcome to this Ethics Alert which will discuss the scheduled expiration of the Dodd-Frank Deposit Insurance Provision on December 31, 2012 which would remove the unlimited deposit insurance coverage for Interest on Lawyer Trust Accounts (IOLTAs- called IOTA trust accounts in Florida) to fiduciary account coverage of $250,000.00 per client ledger within the lawyer’s trust account.

I recently received information advising of the expiration of the Dodd-Frank provision on 12/31/12 and advising that LOMAS will monitor the legal press for more news as the deadline approaches.  If (when) I receive updates, I will share them with you.  A summary of the affect of the expiration of the provision from the FDIC website is below:          

After December 31, 2012, funds deposited in IOLTAs will no longer be insured under the Dodd-Frank Deposit Insurance Provision. However, because IOLTAs are fiduciary accounts, they generally qualify for pass-through coverage on a per-client basis. FDIC regulations provide that deposit accounts owned by one party but held in a fiduciary capacity by another party are eligible for pass-through deposit insurance coverage if (1) the deposit account records generally indicate the account’s custodial or fiduciary nature and (2) the details of the relationship and the interests of other parties in the account are ascertainable from the deposit account records or from records maintained in good faith and in the regular course of business by the depositor or by some person or entity that maintains such records for the depositor.

If an IOLTA does qualify for pass-through coverage as a fiduciary account, then each separate client for whom a law firm holds funds in an IOLTA may be insured up to $250,000.00 for his or her funds.  For example, if a law firm maintains an IOLTA with $250,000.00 attributable to Client A, $150,000.00 to Client B, and $75,000.00 to Client C, the account would be fully insured if the IOLTA meets the requirements for pass-through coverage. If the clients have other funds at the same IDI, those funds would be added to their respective shares of the funds in the IOLTA for insurance coverage purposes.

The website and an FAQ excerpt from 11/9/12 are here: and

The website and an FAQ excerpt from 11/9/12 are here: and

Bottom line:  If this will affect your practice and your IOTA trust account, you should plan accordingly before 12/31/12 and you can also contact your U.S. Representatives and Senators.

Be careful out there!

Disclaimer: this e-mail does not contain any legal advice and the comments herein should not be relied upon by anyone who reads it.

Joseph A. Corsmeier, Esquire

Law Office of Joseph A. Corsmeier, P.A.

2454 McMullen Booth Road, Suite 431

Clearwater, Florida 33759

Office (727) 799-1688

Fax     (727) 799-1670


About jcorsmeier

Joseph A. Corsmeier is an “AV” rated attorney practicing in Clearwater, Florida. He concentrates his practice primarily in the areas of defense of attorney disciplinary matters before The Florida Bar, attorney admission matters before the Florida Board of Bar Examiners, and professional license and disciplinary matters before the Boards of the State of Florida. He provides expert analysis and opinion on conflict of interest and other attorney disqualification and legal malpractice issues and he testified as an expert in the Florida courts. He served as an Assistant State Attorney in the Sixth Judicial Circuit from 1986 to 1990 where he prosecuted felonies exclusively from June 1987, and as Bar Counsel for The Florida Bar’s Department of Lawyer Regulation from 1990 to 1998. He also practices in the areas of estate planning and Medicaid qualification, workers’ compensation, and labor law. Mr. Corsmeier is the author of numerous articles for various bar publications, has spoken at numerous local and statewide seminars on various topics, including ethics and professionalism, and was an instructor of legal ethics for paralegals at Rollins College until the Tampa campus closed. He received his undergraduate degree from Florida State University and his J.D. from Mercer University. He is admitted to practice in all Florida Courts, the Supreme Court of the United States, the United States Court of Appeals for the Eleventh Circuit, and the Middle District of Florida. He is a member of The Florida Bar, American Bar Association, the Association of Professional Responsibility Lawyers, and the Clearwater and St. Petersburg Bar Associations.
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