Which type of bank account is typically required for holding client trust funds?

Client trust funds must be held in a separate TRUST ACCOUNT (sometimes called escrow account or fiduciary account), distinct from the broker's personal or operating funds. KEY CHARACTERISTICS: (1) SEPARATE FROM OPERATING FUNDS: The trust account must be a dedicated account holding ONLY trust funds, not commingled with the broker's own money; (2) LABELED PROPERLY: The bank account must be titled to indicate its trust nature, e.g., 'XYZ Realty Trust Account,' 'XYZ Realty Real Estate Trust Account,' 'Broker Name Escrow Account.' Bank typically prints the account title on checks; (3) AT AN INSURED BANK: Must be at an FDIC-insured bank (or NCUA for credit union); some states specifically require the bank to be approved or in the state; (4) NON-INTEREST OR INTEREST-BEARING: Some states require non-interest-bearing accounts (Florida); others allow interest-bearing if interest goes to specific recipients (often the state real estate trust fund or designated beneficiaries) — this is called IOLTA-style in some jurisdictions; (5) RECORD KEEPING: Bank statements, deposit slips, etc. INTEREST: (1) If interest-bearing, who gets the interest? Typically the depositor (the buyer paying earnest money) per agreement; (2) Or directed to a state real estate trust fund or other designated entity; (3) Some states permit the broker to retain interest with disclosure. WHO IS AUTHORIZED to handle the account: (1) Typically the broker; (2) Some states allow designated personnel under broker supervision; (3) The salesperson should not have unsupervised authority to write trust account checks. TYPES OF TRUST ACCOUNTS by use: (1) GENERAL TRUST ACCOUNT — for earnest money, contract funds; (2) PROPERTY MANAGEMENT TRUST ACCOUNT — separate account for rent and security deposits (usually required to be separate); (3) ESCROW ACCOUNTS for specific transactions (less common in real estate brokerage; more common in title companies/attorneys' practices). HOW FUNDS GET DEPOSITED: (1) Earnest money checks from buyers; (2) Wire transfers; (3) Cashier's checks; (4) Some states explicitly prohibit cash deposits without specific procedures; (5) Funds must be deposited promptly (state-specific). HOW FUNDS GET DISBURSED: (1) At closing per closing statement; (2) Returned to buyer if transaction fails per contract terms; (3) Released per written agreement; (4) By court order or interpleader; (5) ALL disbursements documented with date, payee, amount, purpose. RECONCILIATION (typically monthly): Compare bank statement to broker's records; resolve any discrepancies. INDIVIDUAL CLIENT LEDGERS: Each transaction has a ledger showing all activity related to that transaction. SOFTWARE: Many brokerages use specialized trust account software that integrates with banking, generates required reports, and produces audit trails. COMMON VIOLATIONS: Insufficient funds, commingling, untimely deposits, improper disbursements, missing records, failure to reconcile.