Alabama Supreme Court Designates Alabama Law Foundation as Sole IOLTA Recipient Starting February 2025
The Alabama Supreme Court has issued a new ruling that will significantly alter the administration of Interest on Lawyers’ Trust Accounts (IOLTA) in the state. Effective Feb. 15, the Alabama Law Foundation will become the sole recipient of IOLTA funds in Alabama.
This marks a departure from the previous statute, which allowed for IOLTA funds to be allocated to either the Alabama Law Foundation or the Alabama Civil Justice Foundation. The ruling aims to streamline oversight and ensure that these funds are used effectively to support access-to-justice initiatives.
What Is IOLTA, and Why Does It Matter?
IOLTA, or Interest on Lawyers’ Trust Accounts, is a program that generates funding for legal aid and other charitable purposes. When lawyers hold client funds that are either too small or will be held for too short a time to earn interest for the client, these funds are pooled into an IOLTA account. The interest generated is then distributed to organizations that provide civil legal aid, educate the public on legal issues, and support the administration of justice.
The Alabama Supreme Court oversees the administration of IOLTA funds through the Alabama Rules of Professional Conduct. Under Rule 1.15, lawyers are required to hold certain client funds in IOLTA accounts. The new amendment to Rule 1.15 clarifies that all IOLTA funds will now flow through the Alabama Law Foundation.
The Alabama Law Foundation: Mission and Impact
The Alabama Law Foundation was established in 1987 as the only 501(c) (3) statewide organization that supports programs providing civil legal aid to the poor. The Foundation started the IOLTA program to provide access to justice for all and to promote respect for and understanding of the law. ALF has helped the state’s lawyers make a valuable difference in the lives of Alabama’s citizens.
Each year, the Alabama Law Foundation makes grants for law-related charitable projects. These include grants to organizations that provide free legal aid to the poor in civil cases, for projects that improve the administration of justice, and for law-related education.
Under the new rule, the Alabama Law Foundation will report quarterly to the Alabama Supreme Court, detailing funds received, distributions made, and certification of compliance with the court’s guidelines.
Key Changes in the New Rule
The amended Rule 1.15 introduces several changes designed to centralize and enhance the accountability of IOLTA fund administration:
Sole Designation: The Alabama Law Foundation is now the exclusive recipient of IOLTA funds in Alabama, eliminating the previous option of distributing funds to the Alabama Civil Justice Foundation.
Oversight by the Supreme Court: Before distributing funds, the Alabama Law Foundation must submit the proposed beneficiaries and amounts to the Alabama Supreme Court for approval.
Administrative Limitations: The Foundation can use no more than 10% of IOLTA funds for administrative costs, ensuring that the majority of the funds are directed toward access-to-justice initiatives.
Endowment Provisions: The Foundation may retain unspent funds as part of an endowment, but at least 50% of the previous year’s funds must be distributed annually.
What This Means for Alabama
The new ruling consolidates IOLTA fund administration under a single entity, which the Alabama Supreme Court believes will enhance oversight and ensure that funds are used effectively to benefit underserved communities. By centralizing these funds with the Alabama Law Foundation, the court aims to maximize the impact of IOLTA programs and reinforce the state’s commitment to improving access to justice.
Whether through direct legal assistance or educational initiatives, IOLTA programs address critical legal, educational, and societal needs. The Supreme Court’s ruling allows for greater oversight and efficiency, ensuring these critical programs receive consistent support.
A centralized approach not only amplifies the Alabama Law Foundation’s impact but also demonstrates a robust commitment to addressing systemic barriers to justice in Alabama. For the people of Alabama, this change means enhanced legal resources, strengthened community programs, and a more equitable legal system that leaves no one behind.
Moving Forward
The Supreme Court’s decision to designate the Alabama Law Foundation as the sole IOLTA recipient reflects a strategic move to centralize and optimize the use of these critical funds. As Alabama prepares for this transition in February 2025, the Foundation’s expanded role will likely strengthen the state’s efforts to address disparities in access to legal services, particularly for low-income and underserved populations.
For more information, contact Dawn Hathcock, Executive Director of the Alabama Law Foundation, at 334-781-6344 or email dhathcock@alabamalawfoundation.org.
