Key Takeaways
- NC brokers must deposit trust funds within 3 banking days of receipt in a trust or escrow account
- Trust accounts must be in a federally insured NC financial institution
- Monthly reconciliation of trust accounts is required; records must be retained for 3 years
- Commingling (mixing personal and trust funds) and conversion (using trust funds) are serious violations
- BICs are personally responsible for proper handling of trust funds
Trust Account Requirements in North Carolina
Proper handling of trust funds is one of the most important responsibilities of a North Carolina broker. Trust account violations are a leading cause of license discipline.
Trust Account Basics
Account Requirements
| Requirement | Specification |
|---|---|
| Account Type | Trust or escrow account |
| Location | Federally insured NC financial institution |
| Account Title | Must identify as trust/escrow |
| Registration | Must be reported to NCREC |
| Interest | May be interest-bearing with proper disclosure |
What Funds Go in Trust
| Fund Type | Trust Account? |
|---|---|
| Earnest money deposits | YES |
| Due diligence fees (if held by listing agent) | YES |
| Security deposits (rental) | YES |
| Rent collected for owner | YES |
| Down payments | YES |
| Commission earned | NO - goes to operating account |
Deposit Timing
3 Banking Days Rule
Trust funds must be deposited within 3 banking days of receipt:
| Day | Explanation |
|---|---|
| Banking Day | Monday - Friday (excludes bank holidays) |
| Weekend/Holiday | Does not count toward 3 days |
| Receipt | When broker physically receives funds |
Example Timeline
| Event | Day |
|---|---|
| Contract accepted (Friday) | Day 0 |
| Broker receives check (Monday) | Day 1 - Receipt |
| Tuesday | Day 2 |
| Wednesday | Day 3 |
| Deposit Deadline | End of Day 3 |
Prohibited Practices
Commingling
Commingling is mixing trust funds with personal or business operating funds:
| Prohibited | Permitted |
|---|---|
| Depositing personal funds in trust | Keeping minimum for bank fees |
| Mixing operating funds with trust | Separate trust and operating accounts |
| Using one account for both | Proper account segregation |
Conversion
Conversion is using trust funds for personal or business purposes:
| Example | Consequence |
|---|---|
| Paying personal bills with trust funds | License revocation |
| "Borrowing" from trust account | Criminal prosecution |
| Paying operating expenses from trust | NCREC discipline |
Severity: Conversion is grounds for immediate license revocation and possible criminal charges.
Trust Account Maintenance
Reconciliation Requirements
| Requirement | Frequency |
|---|---|
| Bank statement reconciliation | Monthly |
| Trial balance | Monthly |
| Individual account ledgers | Maintained for each client |
| Broker review | Monthly (by BIC or designated person) |
Record Retention
All trust account records must be kept for 3 years:
- Bank statements
- Reconciliation reports
- Deposit records
- Disbursement records
- Client ledgers
BIC Responsibility
The broker-in-charge is personally responsible for:
| Responsibility | Detail |
|---|---|
| Account setup | Proper account establishment |
| Deposit timing | Ensuring 3-day compliance |
| Reconciliation | Monthly review and sign-off |
| Disbursement | Proper authorization |
| Record keeping | Maintaining all records |
Critical: The BIC is responsible even if they delegate tasks to others. Delegation does not eliminate responsibility.
Within how many banking days must earnest money be deposited in a North Carolina trust account?
How often must a North Carolina broker reconcile their trust account?
Using trust funds to pay brokerage operating expenses is called: