Hello everyone and welcome to this Ethics Alert will discuss the amendment to the Florida Bar’s trust account rules which permits credit unions to maintain IOTA trust accounts, which became effective February 1, 2018. The Supreme Court opinion is here: http://www.floridasupremecourt.org/decisions/2017/sc16-1961.pdf
The proposed amendment to Florida Bar Rule 5-1.1, which was unanimously approved by the Florida Bar’s Board of Governors (BOG) in 2016 and adds federally insured credit unions to the list of financial institutions authorized to hold trust accounts. Florida lawyers were previously only permitted to place IOTA funds in banks and savings and loans institutions because they were not federally insured. In 2014, the U.S. Congress passed a federal statute which expanded federal deposit insurance to include credit unions and the coverage is for up to $250,000.00, which is the same as bank and savings and loans deposits.
According to a quote in a 2016 Florida Bar News article, 41 states currently permit IOTA funds to be placed in credit union accounts and North Carolina’s proposed rule is awaiting approval. The chair also stated that credit unions pay “a little bit more interest” since they are nonprofit entities and banks are for profit.
A representative of the Credit Union National Association also indicated that the higher interest rates and lower costs associated with credit unions “will likely translate into higher revenue generated to The Florida Bar Foundation.” The Bar Foundation is paid the interest on IOTA trust accounts. It has been reported that the Bar Foundation’s IOTA income has been greatly reduced because of the record low interest rates which have been near zero for a number of years.
Bottom line: This Bar Rule revision now permits Florida lawyers to open IOTA Trust Accounts at both credit unions and banks; however, lawyers continue to be responsible for insuring the institution’s full compliance with the Florida Bar Trust Account Rules and their compliance as well.
Be careful out there!
Disclaimer: this Ethics Alert is not an advertisement and does not contain any legal advice and the comments herein should not be relied upon by anyone who reads it.
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Joseph A. Corsmeier, Esquire
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