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 February 15, 2025, 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.
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.
What Do Lawyers Need to Know?
Lawyers who currently have IOLTA accounts with interest going to the Alabama Civil Justice Foundation as their recipient will need to change those accounts over to the Alabama Law Foundation, Tax ID # 63-0951482, per the Supreme Court ruling. They should use the existing Alabama Law Foundation remittance template and submission platform, as well as our payment instructions for all accounts.
If you have any questions or need assistance with the switch, please don’t hesitate to contact Sue Jones at 334-781-6346, sjones@alabamalawfoundation.org, or Sharon McGuire at 334-781-6345, smcguire@alabamalawfoundation.org.
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.