Trust FundsIntermediateAlabama Exam

What is an IOLTA account in the context of real estate trust accounts?

AAn Individual Online Transaction Account

BAn Interest on Lawyers Trust Account — an interest-bearing trust account where interest is pooled for legal aidCorrect

CAn investment account managed by AREC

DAn international real estate transaction account, though the exact requirements can vary somewhat by jurisdiction

Why An Interest on Lawyers Trust Account — an interest-bearing trust account where interest is pooled for legal aid Is Correct

Answer B: An Interest on Lawyers Trust Account — an interest-bearing trust account where interest is pooled for legal aid

IOLTA (Interest on Lawyers' Trust Accounts) are pooled interest-bearing trust accounts used by attorneys, where the interest earned is remitted to fund legal aid programs.

Exam Tip: Trust Funds

Trust fund questions test the rules for handling client money. Know the deadlines for depositing trust funds, what constitutes commingling vs. conversion, and the penalties for violations.

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Key Terms to Know

Fiduciary Duty

The highest legal duty an agent owes to a principal — requiring the agent to act in the principal's best interest above all others.

Deed of Trust

A security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.

Deed

A written legal instrument used to transfer ownership of real property from one party (grantor) to another (grantee).

Escrow

A neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.