Jurisdiction Reference
Alabama IOLTA
Program: Alabama Law Foundation IOLTA Program
Alabama Rule of Professional Conduct 1.15 requires nominal or short-term client and third-person funds to be held in pooled IOLTA accounts at eligible institutions. Effective February 15, 2025, the Alabama Law Foundation is the sole recipient of Alabama IOLTA income. The rule also governs account titling, collected funds, overdraft reporting, record retention, interest comparability, and annual certification.
General information, not legal advice — always confirm against the official Alabama sources below.
Ask about Alabama's IOLTA rules
Deposits, reconciliation, reporting, recordkeeping — answered from Alabama's official sources. Not legal advice.
Quick reference
Plain-language summaries of common Alabama trust-accounting requirements. Use these to orient yourself, then verify the exact rule text through the official sources.
| Topic | Summary | Category |
|---|---|---|
| Separate and identified trust property | Keep client and third-person property separate from lawyer funds. Designate trust accounts, checks, and deposit slips as an Attorney Trust, Escrow, or Fiduciary Account. | Alabama Rule of Professional Conduct 1.15(a). |
| Mandatory IOLTA for pooled funds | Place all commingled client or third-person funds not set up to earn interest for an individual owner in an IOLTA account. | Alabama Rule 1.15(k); Alabama Law Foundation IOLTA guidance. |
| Nominal or short-term funds | Use IOLTA for funds too small or held too briefly to earn income for the client or third person after account and administrative costs. | Alabama Rule 1.15 definitions and subsection (k). |
| Individual client benefit account | Place funds capable of earning net income in an interest-bearing trust account for the individual client or third person rather than pooled IOLTA. | Alabama Rule 1.15(k); Alabama Law Foundation IOLTA overview. |
| Eligible institution only | Maintain IOLTA only at an eligible bank, savings and loan, or qualifying investment company that meets Rule 1.15(k). | Alabama Rule 1.15 definitions and subsection (k). |
| Comparable interest treatment | An eligible institution must pay the highest rate or dividend generally available to similarly situated non-IOLTA customers, subject to the rule’s product and eligibility provisions. | Alabama Rule 1.15(k); Alabama Law Foundation Info for Lawyers. |
| Sole IOLTA recipient | For Alabama IOLTA accounts, direct the interest to the Alabama Law Foundation, the sole authorized recipient effective February 15, 2025. | Amended Alabama Rule 1.15, effective February 15, 2025. |
| Advance fees and limited lawyer funds | Keep unearned fees in trust until earned. Lawyer funds may be present only for unearned fees being held and amounts sufficient for service charges or a waiver. | Alabama Rule 1.15(a). |
| Prompt notice, delivery, and accounting | Promptly notify a client or third person when property is received from another source, deliver property the person is entitled to receive, and provide a full accounting on request. | Alabama Rule 1.15(b). |
| Disputed funds | Keep disputed property separate until the competing interests are accounted for and resolved; do not withdraw the disputed portion. | Alabama Rule 1.15(c). |
| Collected-funds rule | Do not disburse one client’s funds from a pooled account until that client’s deposit is collected, except for instruments expressly treated as collected under the rule. | Alabama Rule 1.15(d). |
| Overdraft reporting agreement | Use a financial institution agreement requiring reports to Alabama State Bar General Counsel for covered insufficient-funds items and unresolved overdrafts. | Alabama Rule 1.15(i). |
| Six-year record retention | Keep complete trust-account and property records for six years after the representation ends, including arrangements for records when a firm dissolves. | Alabama Rule 1.15(a) and (h). |
| Annual IOLTA certification | In-state bar members with a current occupational license must annually certify that they have an IOLTA account or qualify for an exemption during the Foundation’s certification period. | Alabama Law Foundation Annual Certification page. |
Official sources
The authoritative material for this jurisdiction. Confirm every requirement here before acting on it.
Alabama Rule of Professional Conduct 1.15
Current official safekeeping, IOLTA, eligible-institution, and reporting rule.
OpenAlabama Judicial System Rule Updates
Official court index documenting the February 15, 2025 Rule 1.15 amendment.
OpenAlabama Law Foundation IOLTA
Official program overview and pooled-versus-individual account guidance.
OpenAlabama IOLTA Information for Lawyers
Attorney guidance on eligible institutions, fees, exemptions, and closing accounts.
OpenAlabama IOLTA Annual Certification
Official annual certification requirement and September 1 through October 31 window.
OpenAlabama State Bar Trust Accounting Handbook
Official practical handbook incorporating the 2025 trust-account rule amendments.
OpenNotes
- This page applies the Rule 1.15 amendment effective February 15, 2025: the Alabama Law Foundation is now the sole Alabama IOLTA recipient.
- The Foundation monitors institution rate compliance, but each lawyer remains responsible for using an eligible institution and properly safeguarding client property.
- This is a research summary, not legal advice; confirm current court rules, Foundation instructions, and Alabama State Bar guidance for a specific account.
Alabama — Frequently asked
Common questions for Alabama trust accounts. General information only — verify against the official sources above.
Is Alabama IOLTA mandatory?
Yes for pooled client or third-person funds that are not placed in an account earning net interest for an individual owner. Lawyers without such funds may certify an exemption.
Which funds belong in an Alabama IOLTA account?
Nominal or short-term funds that cannot earn net income for the client or third person belong in pooled IOLTA.
When should Alabama funds earn interest for an individual client?
Use a separate interest-bearing trust account when the amount and holding period make it practical to earn income exceeding account and administrative costs.
Who decides whether funds can earn net income?
The lawyer or firm uses good-faith professional judgment after considering expected interest, duration, administrative costs, tax-reporting costs, and available banking capabilities.
Where may an Alabama IOLTA account be opened?
Only at an institution eligible under Rule 1.15 and the Alabama Law Foundation’s compliance program.
Who receives Alabama IOLTA interest?
The Alabama Law Foundation is the sole recipient for Alabama IOLTA income effective February 15, 2025.
What changed in Alabama on February 15, 2025?
Amended Rule 1.15 centralized Alabama IOLTA income with the Alabama Law Foundation, eliminating the former alternative recipient.
Do real-estate closing accounts have to be IOLTA accounts?
Yes when they hold pooled client funds that are not placed in an individual interest-bearing account for a client’s benefit.
What must an Alabama trust account be called?
The account, checks, and deposit slips must be designated as an Attorney Trust Account, Attorney Escrow Account, or Attorney Fiduciary Account.
May a lawyer place personal funds in trust?
Only limited funds permitted by Rule 1.15, such as amounts sufficient for service charges or a waiver, may be included; business and personal operating funds must remain separate.
How are advance fees handled in Alabama?
Unearned attorney fees must remain in trust until earned, and earned amounts should be removed before being used for personal or business expenses.
What must happen when third-party funds arrive?
The lawyer must promptly notify the person with a recognized interest, safeguard the property, deliver amounts due, and provide a full accounting on request.
How are disputed trust funds handled?
Keep the disputed portion separate until the interests are accounted for and the dispute is resolved.
May Alabama lawyers disburse before a deposit clears?
Generally no. Pooled-account disbursements must use collected funds, subject only to the specific instruments and safeguards allowed by Rule 1.15(d).
Does Alabama require overdraft reporting?
Yes. Lawyers must maintain covered trust accounts under an agreement requiring the institution to report specified insufficient-funds items and unresolved overdrafts to State Bar General Counsel.
How long are Alabama trust records kept?
Complete trust-account and property records must be preserved for six years after the representation ends.
Does Alabama require annual IOLTA certification?
Yes. In-state members with a current occupational license certify an IOLTA account or exemption each year.
When is Alabama’s annual certification period?
The Alabama Law Foundation states that the annual certification period runs from September 1 through October 31.
Which IOLTA fees may come from interest?
Rule-defined allowable reasonable fees may be deducted from earned interest; charges such as check printing, wires, certified checks, cash management, and overdrafts are the lawyer or firm’s responsibility.
Who monitors an Alabama bank’s rate compliance?
The Alabama Law Foundation monitors institutional compliance, while the lawyer remains responsible for selecting an eligible institution and managing the account correctly.