Texas Broker Trust Account Rules: The Second-Working-Day Deposit, No Commingling, 30-Day Deadlines and Records

Short answer: A Texas broker who accepts trust money holds it in a fiduciary capacity, in a designated trust account the broker maintains or with an authorized Texas escrow agent. A sales agent may not maintain a trust account and must hand trust money to the sponsoring broker immediately. Unless the principals agree in writing to another time, the broker deposits trust money not later than the close of business of the second working day after receiving it. The broker may not commingle it, must remove money the broker comes to own within 30 days, must pay a written demand within 30 days, accounts to each beneficiary at least monthly when there is activity, and keeps trust records for four years.

Who holds trust money

• Trust money means a client's money, earnest money, rent, unearned fees, security deposits, or any money held for another person.
• Among license holders, only the broker holds it (or delivers it to an authorized escrow agent). A sales agent shall not maintain a trust account, and any trust money a sales agent receives goes to the sponsoring broker immediately.
• A broker is not required to have a trust account unless the broker agrees to hold money belonging to others or to act as an escrow agent.
• The broker may authorize only another license holder to withdraw or transfer trust money, and remains responsible for all of it.

The deposit deadline

The rule calls for deposit within a reasonable time, which TREC has determined to be not later than the close of business of the second working day after the broker receives the trust money. A different time works only if the principals expressly agree to it in writing. Instead of depositing it, the broker may deliver the money to an authorized escrow agent as the principals agreed. Statute separately makes it a ground for discipline to fail to deposit escrow or trust funds within a reasonable time with a Texas title company or in a custodial, trust or escrow account at a Texas banking institution.

Running the account

• No commingling. Trust money may not be mixed with the broker's personal or other non-trust money or kept in a personal or business account. Placing trust money in a personal or operating account, or paying operating expenses from the trust account, is prima facie evidence of commingling.
• Identify it. The account must be clearly identified as a trust account. Separate accounts per client or type of money are optional.
• Bank fees. A reasonable amount of the broker's own money may be kept in the account for bank service fees, with detailed records.
• Earned money out. Money the broker comes to own, including compensation the broker is entitled to, is removed not later than the 30th day after the broker acquires ownership.
• Interest. In an interest-bearing account, the money must be available on time, and the interest goes to the parties who receive the money unless the depositor signed an agreement saying otherwise.
• Accounting. Keep a documentary record of each deposit and withdrawal and account to each beneficiary at least monthly if there was activity.
• Bounced checks. If a deposited check is dishonored, notify all parties in writing immediately.

Paying money out

Disbursing money from a custodial, trust or escrow account before the transaction is completed or terminated is a ground for discipline. So are failing within a reasonable time to account for or remit money belonging to another, and commingling.

Records and supervision

A broker keeps all trust account documentation for four years from the date the document is received or created. The broker's written policies must make sure all trust accounts, including property management trust accounts, and other funds received from consumers are maintained by the broker with appropriate controls. A broker is responsible for the proper handling of trust funds placed with the broker.

Exam traps

• "Second working day" is not "two calendar days" and not "the next business day".
• The 30-day removal rule covers money the broker already owns; the 30-day payout rule starts with a written demand.
• An unlicensed bookkeeper cannot be authorized to withdraw trust money; only a license holder can, and the broker stays accountable.
• Interest does not belong to the broker without a signed agreement.

Practice these in the trust accounts and conduct lesson and see the supervision guide.

Independent exam-prep guide. Not affiliated with the Texas Real Estate Commission or Pearson VUE. Always confirm current requirements with TREC.