What is the difference between a trust account and a personal account for licensees?

• A. A trust account holds client funds separate from personal funds; commingling is prohibited.
• B. A trust account is the same as a personal account.
• C. A trust account is only for real estate brokers who are also lenders.
• D. A trust account is for holding only mortgage payments.

Answer: (A)

A trust account keeps client funds separate from the licensee’s own money. This separation is essential because licensees act as fiduciaries, entrusted with clients’ money and responsible for protecting it and handling it only as directed. Commingling—mixing client funds with personal or business money—is prohibited and can lead to disciplinary action, civil liability, or license suspension. Money that belongs to clients, such as earnest money, security deposits, and funds received in escrow, should be held in the trust account until the transaction closes or funds are disbursed per agreement or instruction. A personal or operating account, on the other hand, is for the licensee’s own income and expenses and should never be used to hold client funds. Keeping separate accounts and reconciling the trust account regularly ensures accurate records and proper disbursement of funds when due.