N.Y. JUD Law § 497 — New York Code / Act JUD / Article 15 / Section 497
Attorneys fiduciary funds; interest-bearing accounts
Status: in_force

§ 497. Attorneys fiduciary funds; interest-bearing accounts. 1. An\n"interest on lawyer account" or "IOLA" is an unsegregated\ninterest-bearing deposit account with a banking institution for the\ndeposit by an attorney of qualified funds.\n  2. "Qualified funds" are moneys received by an attorney in a fiduciary\ncapacity from a client or beneficial owner and which, in the judgment of\nthe attorney, are too small in amount or are reasonably expected to be\nheld for too short a time to generate sufficient interest income to\njustify the expense of administering a segregated account for the\nbenefit of the client or beneficial owner. In determining whether funds\nare qualified for deposit in an IOLA account, an attorney may use as a\nguide the regulation adopted by the board of trustees of the IOLA fund\npursuant to subdivision four of section ninety-seven-v of the state\nfinance law.\n  2-a. "Funds received in a fiduciary capacity" are funds received by an\nattorney from a client or beneficial owner in the course of the practice\nof law, including but not limited to funds received in an escrow\ncapacity, but not including funds received as trustee, guardian or\nreceiver in bankruptcy.\n  3. A "banking institution" means a bank, trust company, savings bank,\nsavings and loan association, credit union or foreign banking\ncorporation whether incorporated, chartered, organized or licensed under\nthe laws of this state or the United States, provided that such banking\ninstitution conducts its principal banking business in this state.\n  4. (a) An attorney shall have discretion, in accordance with the code\nof professional responsibility, to determine whether moneys received by\nan attorney in a fiduciary capacity from a client or beneficial owner\nshall be deposited in non-interest, or in interest bearing accounts. If\nin the judgment of an attorney any moneys received are qualified funds,\nsuch funds shall be deposited in an IOLA account in a banking\ninstitution of his or her choice offering such accounts.\n  (b) The decision as to whether funds are nominal in amount or expected\nto be held for a short period of time rests exclusively in the sound\njudgment of the lawyer or law firm. Ordinarily, in determining the type\nof account into which to deposit particular funds held for a client, a\nlawyer or law firm shall take into consideration the following factors:\n  (i) the amount of interest the funds would earn during the period they\nare expected to be deposited;\n  (ii) the cost of establishing and administering the account, including\nthe cost of the lawyer or law firm's services;\n  (iii) the capability of the banking institution, through\nsubaccounting, to calculate and pay interest earned by each client's\nfunds, net of any transaction costs, to the individual client.\n  (c) All qualified funds shall be deposited in an IOLA account unless\nthey are deposited in:\n  (i) a separate interest bearing account for the particular client or\nclient's matter on which the interest will be paid to the client; or\n  (ii) an interest bearing trust account at a banking institution with\nprovision by the bank or by the depositing lawyer or law firm for\ncomputation of interest earned by each client's funds and the payment\nthereof to the client.\n  (d) Notwithstanding the deposit requirements of this subdivision, no\nattorney or law firm shall be liable in damages nor held to answer for a\ncharge of professional misconduct for failure to deposit qualified funds\nin an IOLA account.\n  5. No attorney or law firm shall be liable in damages nor held to\nanswer for a charge of professional misconduct because of a deposit of\nmoneys to an IOLA account pursuant to a judgment in good faith that such\nmoneys were qualified funds.\n  6. a. An attorney or law firm which receives qualified funds in the\ncourse of its practice of law and establishes and maintains an IOLA\naccount shall do so by (1) designating the account as "(name of\nattorney/law firm IOLA account)" with the approval of the banking\ninstitution; and (2) notifying the IOLA fund within thirty days of\nestablishing the IOLA account of the account number and name and address\nof the banking institution where the account is deposited.\n  b. The rate of interest payable on any IOLA account shall be not less\nthan the rate paid by the banking institution on similar accounts\nmaintained at that institution, and the banking institution shall not\nimpose on such accounts any charges or fees greater than it imposes on\nsimilar accounts maintained at that institution.\n  c. With respect to IOLA accounts, the banking institution shall:\n  (i) Remit at least quarterly any interest earned on the account\ndirectly to the IOLA fund, after deduction of service charges or fees,\nif any, are applied.\n  (ii) Transmit to the IOLA fund with each remittance a statement\nshowing at least the name of the account, service charges or fees\ndeducted, if any, and the amount of net interest remitted from such\naccount.\n  (iii) Transmit to each attorney or law firm which maintains an IOLA\naccount a statement showing at least the name of the account, service\ncharges or fees deducted, if any, and the amount of interest remitted\nfrom such account.\n  (iv) Be permitted to impose reasonable service charges for the\npreparation and issuance of the statement.\n  (v) Have no duty to inquire or determine whether deposits consist of\nqualified funds.\n  7. a. Payment from an IOLA account to or upon the order of the\nattorney maintaining such account shall be a valid and sufficient\nrelease of any claims by any person or entity against any banking\ninstitution for any payments so made.\n  b. Any remittance of interest to the IOLA fund by a banking\ninstitution pursuant to this section shall be a valid and sufficient\nrelease and discharge of any claims by any person or entity against such\nbanking institution for any payment so made, and no action shall be\nmaintained against any banking institution solely for opening, offering,\nor maintaining an IOLA account, for accepting any funds for deposit to\nany such account or for remitting any interest to the IOLA fund.\n  8. Nothing contained in this section shall be construed to require any\nbanking institution to offer, accept or maintain IOLA accounts.\n  9. All papers, records, documents or other information identifying an\nattorney, client or beneficial owner of an IOLA account shall be\nconfidential and shall not be disclosed by a banking institution except\nwith the consent of the attorney maintaining the account or as permitted\nby any law, regulation or adminstrative requirement.\n  10. An attorney or law firm that can establish that compliance with\nsubdivision six of this section has resulted in any banking service\ncharges or fees shall be entitled to reimbursement of such expense from\nthe interest on lawyer account fund by filing a claim with supporting\ndocumentation with the fund.\n