The Supreme Court of Arkansas created the Arkansas IOLTA program in 1984, In Re IOLTA, 283 Ark. 252, 675 S.W.2d 335 (1984), to provide funds for legal services to the poor, projects that improve the administration of justice and legal education. Under the program, interest is paid on nominal or short-term trust deposits held in a lawyer's or law firm's client trust account, with the interest remitted directly by the financial institution to the Arkansas IOLTA Foundation.
In October of 1994, the Arkansas Supreme Court modified Arkansas Model Rule of Professional Conduct Rule 1.15 to make the previously voluntary IOLTA program mandatory for lawyers who handle qualifying funds.
The Arkansas Model Rules of Professional Conduct require an attorney to hold clients' funds in an account separate from the attorney's firm operating account. Rule 1.15 requires that all funds be held in an interest-bearing account, with the interest payable either to the client or to the IOLTA Foundation. To comply with their ethical obligation, attorneys must place clients' funds (such as proceeds from settlements, filing fees, retainers, etc.) in the lawyer's client trust account until distribution.
For client deposits that are large enough or to be held for a long enough period of time to warrant the cost of administering an individual account, lawyers are obligated to set up a separate interest-bearing account for the benefit of the individual client. Generally, however, the deposits are not large enough or held long enough to generate interest that would offset the costs of maintaining a separate account. Consequently, attorneys routinely pool clients' funds in a single client trust account. Neither the attorney nor the client can receive interest, so the interest is paid to the Arkansas IOLTA Foundation to support law-related, charitable and educational activities.