Jurisdiction Reference
Michigan IOLTA
Program: Michigan State Bar Foundation IOLTA Program
Michigan lawyers must safeguard client and third-person funds under MRPC 1.15 and maintain lawyer trust accounts at approved financial institutions subject to trust-account overdraft notification. Funds that cannot earn net income for an individual owner belong in IOLTA, with interest paid to the Michigan State Bar Foundation; funds capable of earning net income should be placed in a client-benefit account. Michigan also requires segregation, prompt notice and delivery, complete five-year records, and periodic review of the IOLTA determination.
General information, not legal advice — always confirm against the official Michigan sources below.
Ask about Michigan's IOLTA rules
Deposits, reconciliation, reporting, recordkeeping — answered from Michigan's official sources. Not legal advice.
Quick reference
Plain-language summaries of common Michigan trust-accounting requirements. Use these to orient yourself, then verify the exact rule text through the official sources.
| Topic | Summary | Category |
|---|---|---|
| Segregate client and third-person funds | Hold client or third-person property separately from the lawyer's own property and use a clearly identified trust account for covered funds. | Michigan Rule of Professional Conduct 1.15(d) |
| Use IOLTA for nominal or short-term funds | Deposit client or third-person funds that cannot earn income for the owner in excess of the cost of securing that income into a Michigan IOLTA account. | MRPC 1.15(a)(3), (g) |
| Use a client-benefit account when net income is possible | Place funds that can earn income above the costs of establishing and administering a separate arrangement into a non-IOLTA interest-bearing trust account for the client or third person. | MRPC 1.15(g); Michigan IOLTA Guidelines |
| Select an eligible and approved financial institution | Maintain IOLTA at an eligible bank, credit union, savings and loan, or qualifying investment company authorized in Michigan, federally insured where applicable, and approved for trust accounts under the overdraft-notification rule. | MRPC 1.15(a)(2), 1.15A; MSBF eligible-institution guidance |
| Obtain rate comparability | The institution must pay an IOLTA rate no lower than the highest rate generally available to comparable non-IOLTA customers when the account meets the same balance and eligibility conditions. | MRPC 1.15(a)(2) |
| Use the required account identification | Title the account in the name of the lawyer or law firm and clearly identify its fiduciary character as IOLTA, non-IOLTA, trust, or escrow as applicable. | MRPC 1.15 and 1.15A; SBM trust-account guidance |
| Submit the IOLTA notice and program tax ID | Use the Michigan Notice to Eligible Financial Institution when establishing IOLTA and direct the institution to use Michigan State Bar Foundation tax identification number 38-1459016 for interest reporting. | MSBF Notice to Eligible Financial Institution |
| Allocate account fees correctly | Only allowable reasonable IOLTA fees may be deducted from interest. Other charges are the lawyer's responsibility, and fees exceeding the account's interest may not be taken from client principal or another IOLTA account's interest. | MRPC 1.15(a)(1) |
| Keep advance fees in trust until earned | Deposit advance legal fees and expenses into trust and withdraw the lawyer's portion only as fees are earned or expenses incurred, subject to Michigan's written fee and accounting requirements. | MRPC 1.15(d) |
| Notify, account, and deliver promptly | Promptly notify the client or third person when property is received, preserve it, provide an accounting, and deliver funds or property the owner is entitled to receive. | MRPC 1.15(b), (d) |
| Protect disputed funds | Keep property claimed by two or more persons separate until the dispute is resolved and promptly distribute any undisputed portion. | MRPC 1.15(d) |
| Maintain complete trust-account records for five years | Keep deposit and withdrawal records, account statements, client ledgers or equivalent accountings, fee agreements, bills, and supporting documentation for at least five years after termination of the representation. | MRPC 1.15; SBM trust-account guidance |
| Review IOLTA status at reasonable intervals | Reevaluate funds held in IOLTA when amounts, holding periods, rates, or costs change so funds that become capable of earning net income are moved prospectively to an appropriate non-IOLTA account. | MRPC 1.15; State Bar of Michigan Ethics Opinion R-21 |
| Use an institution with overdraft reporting and respond promptly | The depository must report any properly payable item or debit that creates insufficient funds or a negative balance to the lawyer and grievance authority. The lawyer must investigate and provide requested records or explanations promptly. | MRPC 1.15A; State Bar of Michigan TAON guidance |
Official sources
The authoritative material for this jurisdiction. Confirm every requirement here before acting on it.
Michigan Rules of Professional Conduct
Official current text of MRPC 1.15 and the trust-account overdraft-notification rule.
OpenMichigan State Bar Foundation — IOLTA for Attorneys
Official program guidance on account selection, establishment forms, eligible institutions, and overdraft notification.
OpenMichigan IOLTA Eligible Financial Institutions
Current official list of participating and eligible Michigan IOLTA financial institutions.
OpenMichigan IOLTA Notice to Eligible Financial Institution
Official account-establishment form with account options, program tax ID, remittance, and fee instructions.
OpenState Bar of Michigan — Trust Account Overdraft Notice
Official TAON hub with governing rules, approved institutions, agreements, and lawyer guidance.
OpenState Bar of Michigan — IOLTA FAQs
Official practical guidance on Michigan IOLTA and non-IOLTA account handling.
OpenNotes
- Michigan's governing materials distinguish the IOLTA eligibility rule in MRPC 1.15 from the trust-account overdraft-notification controls in MRPC 1.15A; both must be satisfied when selecting a depository.
- Michigan requires five-year trust-account record retention. Monthly three-way reconciliation is presented by State Bar guidance as a strong management practice, not restated here as a separate cadence requirement unless the governing text expressly supplies one.
- When a Michigan account is closed, the financial institution ordinarily handles notice to the Michigan State Bar Foundation, but the lawyer remains responsible for reconciliation, proper distributions, closing charges, and record preservation.
Michigan — Frequently asked
Common questions for Michigan trust accounts. General information only — verify against the official sources above.
Who needs a Michigan lawyer trust account?
A lawyer who holds client or third-person funds in connection with a representation must place them in an appropriate IOLTA or non-IOLTA trust account and comply with MRPC 1.15.
Which funds belong in Michigan IOLTA?
Funds that are nominal, expected to be held briefly, or otherwise cannot earn income for the owner above the cost of securing and administering that income.
What happens to funds that can earn net income for a client?
They should be placed in a separate or appropriately subaccounted interest-bearing non-IOLTA trust account for the client's benefit.
Who receives Michigan IOLTA interest?
The financial institution remits net IOLTA interest or dividends to the Michigan State Bar Foundation for civil legal-aid purposes.
Where may a Michigan trust account be opened?
At a financial institution eligible under MRPC 1.15 and approved under Michigan's trust-account overdraft-notification requirements.
Does Michigan require comparable IOLTA rates?
Yes. An eligible institution must pay no less than the highest rate generally available to similarly situated non-IOLTA customers when comparable qualifications are met.
How should a Michigan IOLTA be titled?
Use the lawyer's or law firm's name and a designation such as IOLTA, lawyer trust account, or escrow account that clearly identifies its fiduciary nature.
Which tax number is used for Michigan IOLTA interest?
Michigan State Bar Foundation instructs institutions to use program tax identification number 38-1459016 rather than the lawyer's personal taxpayer number.
Which bank fees may reduce IOLTA interest?
The rule permits defined reasonable fees such as per-check, per-deposit, minimum-balance, insurance, sweep, and reasonable administration charges. Other charges belong to the lawyer.
Can bank charges be taken from client principal?
No. Charges beyond allowable IOLTA interest deductions are the lawyer's responsibility and may not invade client principal.
Where do advance fees and expense deposits go?
Ordinarily into trust until the fee is earned or the expense incurred, with withdrawals supported by accurate billing and accounting records.
May a lawyer keep personal funds in the trust account?
Only a limited amount reasonably necessary to pay account charges may be maintained; unrelated operating or personal funds must remain separate.
What records should be maintained?
Maintain transaction records, statements, deposits, checks or debit records, client-level accountings, fee agreements, bills, and documents supporting distributions and earned-fee withdrawals.
How long must Michigan trust-account records be retained?
At least five years after termination of the representation under MRPC 1.15, subject to any longer period required by other law.
Is monthly three-way reconciliation expressly mandated?
Michigan bar guidance treats monthly reconciliation of the bank statement, trust register, and client ledgers as a strong best practice. The page distinguishes that guidance from the rule's express five-year record duty.
When should the IOLTA versus non-IOLTA decision be revisited?
At reasonable intervals and whenever the amount, expected duration, rates, or costs materially change.
What triggers Michigan overdraft reporting?
A properly payable instrument or other debit that would create insufficient funds or a negative balance, whether or not honored and regardless of overdraft protection.
Who receives an overdraft report?
The approved institution reports to the account holder and the Michigan grievance authority under MRPC 1.15A.
How should a trust account be closed?
Fully reconcile it, resolve outstanding checks, distribute all client and lawyer funds correctly, cover closing fees with lawyer funds, close the account, destroy unused checks, and retain the records.
What happens if a lawyer is disqualified from practice?
The lawyer must properly disburse or transfer all client and fiduciary funds and close IOLTA and non-IOLTA accounts while preserving required records.