With the recent meltdown of financial institutions, some lawyers have been wondering whether and how client funds held in a lawyer’s IOLTA account are be covered by FDIC insurance in the event of a bank failure. In general, the rule has been that FDIC insurance covered $100,000 of any individual’s funds deposited in a single financial institution, regardless of how many accounts that $100,000 was spread over, including the portion of the individual’s funds that are in the lawyer’s trust account.
On Friday, the FDIC announced its approval of a final rule regarding the Temporary Liquidity Guarantee Program (TLGP), which was originally adopted on October 13, 2008, as one of the steps to address the credit crisis. Part of the new regulation provides that FDIC insurance will apply to all funds held in lawyers’ IOLTA accounts, without any limit per client, until December 31, 2009. After that date, the guarantee amount will revert back to the basic insurance amount, which I believe is $100,000.
The press release, which includes a link to the actual regs, can be found here.