Question about IOLA accounts (IOLA = Interest on Lawyer Account Fund, see iola.org/about-iola). (IOLA is called IOLTA in some states.)

Our client has to pay restitution to Walmart. It has taken me months to get payment instructions from Walmart but now we have everything set. (I had to get them to assign a magic reference number.)

The easiest way to make the payment is to use a web form and enter a credit card number. That will generate an email receipt. The slightly harder way is to mail in a check and then try to wring a receipt from the office that took three months to issue a reference number.

Our client tried to make the payment to the court months ago but the court wouldn't accept payment. The client wanted to get the money out of his bank account asap so he wouldn't spend it, so he wrote a check to our firm. My supervising attorney (SA) put it in his IOLA account. Now what?

I think it's okay to briefly transfer the funds from IOLA to operating (business) and then make the credit card payment online. SA disagrees and thinks the only kosher way to do this is to write a check on the IOLA account. I'm going to do it his way but I'm curious whether his concern was a bit over the top. He thinks what I'm proposing would constitute commingling of funds.

If you prefer a more general question, consider almost all of the above background for why I'm asking the question. Basically what I'd like to know is, is it okay to transfer a sum out of IOLA into Operating (Business) for five minutes in order to make an online payment using a credit card. (IOLA accounts don't have credit cards associated with them.)

What about writing a check on the IOLA account, to make a credit card payment? (To me, that would not really make things more transparent....)

It would be great to have an actual reference but a conceptual answer would be helpful too.

  • I think this comes under the heading of specific legal advice unless significantly reworded. Also please expand your acronyms Nov 19, 2021 at 23:24
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    @DavidSiegel - Is that better? Nov 19, 2021 at 23:40
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    I think this is right on the edge of specific legal advice, but I have retracted my close vote. Please see law.meta.stackexchange.com/questions/1185/… and law.meta.stackexchange.com/questions/tagged/legal-advice Nov 19, 2021 at 23:50
  • Many state bars have ethics help lines. If you are an attorney and you want to help your supervisor think about the problem you might call them. Messing with clients money can get you disciplined. If this comes up a lot I’d look into a debit card for the account or a new business account with the minimum balance that you never use other than for the purpose you suggest. Again these ideas would be checked with the ethics hot line. Nov 20, 2021 at 15:43
  • @GeorgeWhite I did read that the debit card function is not allowed for IOLA accounts. Also note that if you're going to hold client funds it is required to deposit them into the IOLA. I'm working on finding a hotline I can use as a (non-attorney) paralegal. Thanks for the suggestion. Nov 20, 2021 at 19:24

2 Answers 2


Note: The sources below are for client escrow/trust accounts rather than IOLA accounts per se, but IOLA appears to be substantially similar in the sense that they represent funds that the lawyer is not free to spend administratively. In other words, they are trust funds subject to fiduciary duty and not ordinary operating accounts.

The Staff of the Indiana Supreme Court Disciplinary Commission considered such a possibility in their opinion TRUST ACCOUNT MANAGEMENT: HANDLING CLIENT AND THIRD PARTY FUNDS. While not stating outright that such commingling is unethical if there is neither intent to defraud nor recklessness, it gives two reasons why it could cause serious trouble:

  1. Risks of Lawyer Commingling Client Funds in Lawyer's Personal or Business Account

(a) Client funds become available to the lawyer's personal creditors in the event of an attachment of those funds pursuant to proceedings supplementary to execution or otherwise under the Depository Financial Institutions Adverse Claims Act. IC 28-9-1-1, et seq. Even if the identity of the funds is later clarified, the client funds may be frozen for up to ninety (90) days by virtue of the automatic hold provision of IC 28-9-4-2.

(b) Upon bankruptcy, dissolution of marriage or death of the lawyer, client funds may become a part of the lawyer's bankruptcy, marital or probate estate. Once again, there may eventually be a separation of interests in the funds, but in the meantime, client funds will be unavailable to their true owners.

(c) ...[a scenario involving actual fraud and/or misappropriation]

What they are saying is that even if you 100%, really and truly intend to just use your operating account as an "in and out" tool with full intention to devote your entire attention to promptly disburse the funds to their proper destination, that five minutes of commingling could coincide with some sort of legal event that would greatly complicate the payment.

For example, you transfer the client's funds from the escrow account into your firm's operating account at Time=0, morally confident that the transfer will be complete at Time=5. Unbeknownst to you, an earthquake occurs at Time=3 in which you are knocked offline and you and your entire firm are killed by falling debris. The contents of your operating account are frozen by your bank and sent to probate. Your client and Walmart hire another attorney to spend the next few months arguing over what your intentions were and why all of that "operating" money needs to be paid over to Walmart.

Similar to the above, you are in the middle of the transfer when a court order is served on your bank to freeze your operating account as part of some investigation into something entirely unrelated to your representation of your current client. Now, you are making your case to the court to unfreeze certain funds while Walmart is still waiting and your client is upset that you messed up something that should have been "simple".

A potential solution:

The same opinion, in Attachment G, provides:

Lawyers are permitted to advance filing fees for their clients out of operating funds, see, Ind. Prof. Cond. R. 1.8(e). In that event, no trust account questions arise from the use of a debit card that draws funds from an operating account.

The opinion then seems to indicate that debit cards should not be used, but in this case they are talking about linking cards directly to the escrow account:

May lawyers use debit cards to pay client funds for filing fees directly out of trust? The answer has two parts. First, current rules appear to prohibit it. Second, even if the rules were not an impediment, many banks refuse to issue debit cards on trust accounts.

The professional rule cited above in the Indiana Rules of Professional Conduct provides that lawyers may "advance court costs and expenses of litigation". If the payment to Walmart can be considered a court cost or expense, it may be reasonable to pay the amount out of your operating fund and then immediately reimburse it with a client reimbursement from their escrow funds.

The pay-then-reimburse model also mitigates the issue mentioned above about intervening causes stopping the transfer. If you have a heart attack right after advancing the funds from your operating account but before filling out the paperwork to reimburse yourself, neither the client nor the other party (Walmart) has been adversely affected.


Write a check.

If you do so, you don't need a receipt since the cancelled check or an electronic copy of it that will be provided to your bank will suffice. And, you have never taken the money out of trust and into your individual firm's funds.

A credit card isn't absolutely forbidden in the structure you propose (although @RobertColumbia proposes a better one), but it creates potential problems such as correct treatment of credit card user benefits like airline miles or cash back, and creates a less clean paper trail. It also is complicating for income tax purposes, muddying the paper trail for that purpose.

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