Home Attorneys & Law How Does FDIC Insurance Work for Lawyer Trust Accounts?

How Does FDIC Insurance Work for Lawyer Trust Accounts?


Earlier this month, within days of each other Signature Bank and Silicon Valley Bank were closed and the Federal Deposit Insurance Corporation (FDIC) was appointed the receiver for both. This happened because the banks did not have enough liquid cash assets to cover customer demand for withdrawals. When a bank goes insolvent, the FDIC provides federally-funded insurance to help depositors recover funds that should have been protected by the bank.

With this news, lawyers are looking at their own banks.

What happens to your law firm if your bank closes? Are your clients funds held in trust secure? Are you prepared to answer their questions about the security of their funds in your trust account? What is the procedure for recovering IOLTA funds stored in an insolvent bank?

Lawyers need to become familiar with how FDIC insurance works for trust accounts.

What is FDIC Insurance?

From the FDIC’s website, the agency was created by Congress to “maintain stability and public confidence in the nation’s financial system.” Regulated banks and saving associations pay deposit insurance premiums to the FDIC….

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