Real Estate · Trust Account Management

Under state law, how often must a broker typically reconcile the brokerage trust (escrow) account?

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Correct answer

Regularly — most states require monthly reconciliation, comparing the trust account bank balance, the broker's records, and the total of individual client ledgers, which must all agree

A Regularly — most states require monthly reconciliation, comparing the trust account bank balance, the broker's records, and the total of individual client ledgers, which must all agree
B Only when audited
C Never
D Once a year

Why this is the answer

Trust account reconciliation: Brokers must regularly reconcile the trust/escrow account — most states require MONTHLY reconciliation.

Three-way reconciliation: The broker compares and confirms that these all AGREE: (1) the trust account BANK STATEMENT balance; (2) the broker's TRUST ACCOUNT JOURNAL/record (running total of all funds); (3) the sum of all INDIVIDUAL CLIENT/BENEFICIARY LEDGERS (what is owed to each party); ALL THREE MUST MATCH.

Discrepancy: Any difference signals an error, an unrecorded transaction, or — most seriously — a shortage (which could indicate commingling or conversion); must be investigated and corrected immediately.

Records: Brokers must maintain detailed records of every trust deposit and disbursement, with the date, amount, source, and purpose.

Separate account: Trust funds must be in a separate account, never mixed with operating/personal funds (no commingling).

Retention: Records kept for the state-required period.

State audits: Commissions audit trust accounts; deficiencies lead to discipline; the requirement for regular (typically monthly) three-way trust account reconciliation is a critical broker responsibility and a frequent state broker exam topic — proper trust accounting protects client funds.

Source: Real Estate Broker State — Trust Accounts, Reconciliation

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About this topic: Trust Account Management

Trust account management questions cover the state's rules on opening and maintaining trust accounts, deposit deadlines, disbursement, reconciliation, audits and the penalties for mishandling funds. This is one of 12 Broker (State Law) questions on trust account management, each with a full explanation on a single study page.

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Under state law, how often must a broker typically reconcile the brokerage trust (escrow) account?

Why this is the answer

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About this topic: Trust Account Management

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