Hawaii IOLTA: A Resource for Attorneys

What is IOLTA?

The Interest on Lawyers’ Trust Accounts (IOLTA) program is mandated by Rule 11 of the Hawaii Supreme Court. Attorneys must maintain a trust account for client funds that are nominal in amount or expected to be held for a short period.

The interest generated from these accounts is directed to the Hawaii Justice Foundation (HJF), a nonprofit organization established in 1969 to administer IOLTA funds.

These funds support legal services for low-income individuals, public and legal education, and improvements in the administration of justice. The program ensures that client funds are safeguarded while contributing to public good without additional cost to attorneys or clients.

But while clear regulatory requirements are established, we observe a significant gap between compliance mandates and practical implementation guidance. Very few resources provide a direct example of the required reporting.

This page fills that gap by pointing to a real example and providing clear references to the rules and resources.

Who Must Comply with IOLTA?

All members of the Hawaii State Bar Association (HSBA) who practice law in Hawaii and hold nominal or short-term client funds are required to maintain an IOLTA account. The following groups are exempt from this requirement:

• Attorneys who do not hold client funds require a trust account.
• Attorneys who do not practice law in Hawaii.
• Full-time judges, government attorneys, or military attorneys.
• Inactive members of the bar.

IOLTA and escrow accounts differ in how they manage client funds—one pools them to support legal aid, while the other holds them separately for individual client transactions.

Failure to comply with IOLTA requirements, including annual certification, may result in administrative suspension from practicing law, as monitored by the HJF.

Establishing an IOLTA Account

To establish an IOLTA account, attorneys should follow these steps:

1. Select a Participating Bank: Choose from one of the nine approved financial institutions in Hawaii (listed below).
2. Complete Form 2: Obtain the “Notice To Financial Institution” (Form 2) from the Hawaii Justice Foundation. Provide this form to the bank when opening the account.
3. Correct Account Title: Ensure the account is titled “Client Trust Account” as required by Hawaii Rules of Professional Conduct (HRPC) 1.15(b).
4. Notify HJF: After opening the account, fax or mail a copy of a voided check or deposit slip to the HJF at 808•528-1974 or P.O. Box 1230, Honolulu, HI 96807-1230.

The process is designed to be straightforward, and the HJF provides resources to simplify setup.

Annual Reporting Requirements

Attorneys must certify their IOLTA account status annually, typically in November or early December, when the HSBA sends the IOLTA Certification form along with the annual dues notice. The process involves:

• Completing and signing the two-sided IOLTA Certification form.
• Attaching a voided check or deposit slip from the IOLTA account.
• Returning the form with the annual bar dues payment to the HSBA.

Any changes to the IOLTA account, such as a change in bank or account location, must be reported promptly to the HJF via email (hjf@hawaii.rr.com) or fax (808-528-1974).

Hawaii IOLTA Reconciliation and Bookkeeping

Most law firms do not struggle with the ethics of trust accounting. They struggle with the logistics.

When dozens, or hundreds of client transactions flow through a single pooled IOLTA trust account, things get messy fast. A missed entry here or a mislabeled transfer there can throw off the entire reconciliation.

And when the bookkeeping reconciliation is off, everything is off. Even if you have not misused a dollar, you will have no way to prove that you comply.

That is why reconciliation is not a luxury. It is a necessity.

An Example of Trust Compliance

We created a video that walks you through an actual Hawaii IOLTA trust account reconciliation package.

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This example includes the three-way summary page, the client ledger, the general ledger, and bank account reconciliation reports.

It also explains how the client balance, general ledger balance, and reconciled bank account balance must all match.

List of Approved IOLTA Banks in Hawaii

The following nine banks participate in the Hawaii IOLTA program, as outlined by the Hawaii Justice Foundation. Four of these are “Prime Partner Banks,” which offer higher interest rates to the HJF:

Attorneys are encouraged to contact banks directly to inquire about interest rates, terms, and any associated costs. The HJF covers standard monthly service fees for IOLTA accounts, but attorneys are responsible for fees related to insufficient funds, stop payments, or check printing.

Where Most Firms Struggle

• Service Fees and Interest: Monthly service fees (except for specific charges like cashier’s checks or insufficient funds) are covered by the bank and/or the HJF. The net monthly interest earned on IOLTA accounts is transferred to the HJF to fund its programs.
• Non-Compliance Consequences: Failure to complete the annual IOLTA certification or maintain a compliant account can lead to administrative suspension, as the HJF actively monitors compliance.
• Confidentiality: The HJF only accesses registration/certification data and monthly bank reports, which include details like average daily balance, interest rate, and net interest. Individual client transactions remain confidential.
• Tax Implications: There are no tax implications for attorneys or their firms. Financial institutions file W-9 forms, listing the HJF as the “Payee” with taxpayer ID 23-7047345, ensuring compliance with IRS regulations.
• Error Handling: If funds are mistakenly deposited into an IOLTA account, attorneys can contact the HJF for a refund of transferred interest. Financial institutions are responsible for remittance errors, not attorneys.

Resources and Further Information

For additional guidance, attorneys can access the following resources:

• Complying with Rule 11: A detailed information sheet from the HJF outlining IOLTA requirements.
• Hawaii Justice Foundation: The official website for the HJF, providing resources and contact information.
• Hawaii State Bar Association IOLTA Information: HSBA’s dedicated page for IOLTA compliance and resources.
• Office of Disciplinary Counsel: For specific questions regarding compliance with Rule 11 or ethical obligations.
• American Bar Association IOLTA Directory: Includes contact details for the HJF and other state IOLTA programs.

Contact Information

For questions or assistance with IOLTA compliance, contact the Hawaii Justice Foundation:

• Address: P.O. Box 1230, Honolulu, Hawaii 96807-1230
• Phone: 808-537-3886
• Fax: 808-528-1974
• Email: hjf@hawaii.rr.com

By adhering to these guidelines, attorneys in Hawaii can ensure compliance with the IOLTA program while supporting vital legal services for underserved communities.

Need Help with IOLTA Bookkeeping in Hawaii?

IOLTA compliance can be time-consuming and easy to overlook, but the consequences aren’t. Our IOLTA bookkeeping and reconciliation services ensure:

• Your client trust records are accurate and audit-ready
• Your reconciliations match every month
• You stay compliant without the stress

If trust accounting gives you a headache—or if you are just not sure your current system would pass an audit—we can help.

👉 Schedule a consultation to discuss our trust accounting services.

Clarity is a phone call away.

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