Must my contract deposit be placed in an interest bearing account?


Contract dpNot in all cases, but escrow agreements should require interest-bearing accounts when escrow funds can generate significant interest for one or more of the parties. For small and short-term escrow deposits, lawyers are permitted by state law to use so-called “IOLA Accounts”(Interest On Lawyers Account). Interest earned on these IOLA accounts is pooled and used to finance civil legal services for the poor.

If you arrange for an interest-bearing bank account, the escrow agent and bank may require a Social Security or Federal Tax Identification number for federal and state income tax purposes.

 


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