California Real Estate SalespersonPractice of Real Estate and DisclosuresEasy
A new broker opens a bank account to hold client deposits. Under California trust fund handling requirements, the account title must clearly indicate that:
- AThe funds belong to the brokerage's general operating business
- BThe funds are held in trust and the broker is acting as trustee
- CThe account is jointly owned with the escrow company
- DThe account belongs to the broker personally
Show answer & explanationAnswer & explanation
Correct answer: B. The funds are held in trust and the broker is acting as trustee
California law requires that a broker's trust fund account be identified as a 'trust account' with the broker designated as trustee, distinguishing it from the broker's personal or general business accounts.
Why the other options are wrong
- A. Labeling it as a business account would constitute commingling.
- C. Joint ownership with escrow is not a trust account requirement.
- D. Personal titling would mix client funds with the broker's own assets, a violation.
Trust Account Titling
A broker's trust fund bank account must be titled to show it is a trust account with the broker as trustee, keeping client funds separate from personal or business funds.
- Prevents commingling
- Required by California Business and Professions Code
- Bank must acknowledge trust nature of account
Memory trick: Label it 'Trust' or lose your license bust.