Trust Accounts

# Trust Accounts ## The Foundational Purpose of Trust Accounts A real estate trust account exists for one reason: to protect client funds. When a buyer deposits earnest money, or a tenant pays a security deposit, those funds do not belong to the broker — they belong to a principal in the transaction. California law mandates that brokers segregate these funds completely from all personal and business operating accounts. This separation is the legal and ethical backbone of real estate brokerage. The CA DRE treats trust account violations with extreme seriousness. BPC § 10176 expressly lists commingling as grounds for license suspension or revocation: "Commingling with his or her own money or property the money or other property of others which is received and held by him or her." BPC § 10146 goes further — violations of advance fee trust provisions create a statutory presumption of violation of Penal Code §§ 506 and 506a (criminal misappropriation), and principals may recover treble damages plus attorney's fees. Brokers must understand not just the rules but the rationale behind them: client money must be traceable, untouched, and available for disbursement at any authorized moment. --- ## Trust Account Setup Requirements A California broker must establish a trust account at a federally insured depository institution (FDIC-insured bank or NCUA-insured credit union). The account must be: - Titled in the broker's name (or the corporation's name if a corporate broker) followed by the words "Trust Account" - For example: "Jane Smith, Real Estate Broker, Trust Account" or "Sunrise Realty Inc., Trust Account" - Maintained…