Key Takeaways
- Brokers must maintain a trust account (escrow account) at an Idaho financial institution
- All client funds must be deposited into the trust account within specified timeframes
- Commingling broker funds with client funds is strictly prohibited
- Trust account records must be maintained for at least 5 years in Idaho
- IREC has authority to audit trust accounts at any time without notice
Idaho Trust Account Requirements
Idaho brokers must maintain trust accounts to hold client funds separate from their business and personal funds.
Trust Account Basics
What is a Trust Account?
A trust account (also called an escrow account) is a bank account where brokers hold funds belonging to others:
| Fund Type | Examples |
|---|---|
| Earnest money deposits | Buyer's good faith deposit |
| Security deposits | Tenant deposits on rentals |
| Rent collections | Collected on behalf of landlords |
| Other client funds | Closing proceeds pending disbursement |
Where to Open
Trust accounts must be at:
- An Idaho financial institution
- An institution that is federally insured
- An account that is clearly designated as a trust account
Account Requirements
| Requirement | Details |
|---|---|
| Account name | Must include "trust" or "escrow" designation |
| Location | Idaho financial institution |
| Type | Checking account (for easy disbursement) |
| Interest | Can be interest-bearing per agreement |
Key Requirement: The account must be clearly identifiable as a trust account, separate from the broker's operating accounts.
Deposit Requirements
Timeline
| Situation | Deposit Deadline |
|---|---|
| Earnest money | Per contract terms (typically 3-5 business days) |
| Security deposits | Per lease agreement |
| Rent | Per management agreement |
Proper Deposits
All client funds must be deposited into the broker's trust account—not:
- Salesperson's personal account
- Broker's operating account
- Any other non-trust account
Critical Rule: Salespersons cannot hold client funds. Only designated brokers maintain trust accounts.
Broker's Operating Funds
A broker may keep a small amount of their own funds in the trust account:
| Purpose | Amount |
|---|---|
| Maintain minimum balance | As required by bank |
| Cover bank fees | Small amount for service charges |
| Prevent overdraft | Reasonable cushion |
Warning: Keeping excessive broker funds in the trust account may be considered commingling.
Prohibited Practices
Commingling
Commingling is mixing client funds with broker's personal or business funds. It is strictly prohibited.
| Allowed | NOT Allowed |
|---|---|
| Client funds in trust account | Client funds in operating account |
| Small broker deposit to maintain account | Large broker funds in trust account |
| Interest earned (per agreement) | Using client funds for business expenses |
Conversion
Conversion is using client funds for unauthorized purposes. It is a serious violation that can result in:
- License revocation
- Criminal charges
- Civil liability
- Personal liability for broker
Record Keeping Requirements
Required Records
Brokers must maintain detailed records:
| Record | Description |
|---|---|
| Bank statements | Monthly statements from financial institution |
| Deposit receipts | Documentation of each deposit |
| Disbursement records | Documentation of each payment |
| Client ledgers | Individual records for each client |
| Transaction files | All transaction documentation |
| Reconciliations | Monthly reconciliation of all accounts |
Retention Period
| Requirement | Duration |
|---|---|
| Trust account records | 5 years minimum |
| Transaction files | 5 years minimum |
Idaho Specific: Idaho requires 5 years of record retention, which is longer than some other states.
Monthly Reconciliation
Brokers must reconcile trust accounts monthly:
| Step | Action |
|---|---|
| Bank statement | Obtain and review |
| Client ledgers | Balance all individual ledgers |
| Compare | Bank balance must equal client ledger totals |
| Document | Keep written reconciliation |
IREC Audits
IREC has authority to:
- Audit trust accounts at any time without prior notice
- Review all records during investigations
- Take disciplinary action for violations
- Order restitution to harmed parties
Common Audit Findings
| Issue | Consequence |
|---|---|
| Shortage of funds | Serious violation - potential revocation |
| Poor record keeping | Warning to suspension |
| Late deposits | Warning to fine |
| Commingling | Fine to revocation |
| Failure to reconcile | Warning to fine |
Who is authorized to maintain a trust account for client funds in Idaho?
How long must Idaho brokers maintain trust account records?
How often must Idaho brokers reconcile their trust accounts?
What is "commingling" in real estate trust account management?