Key Takeaways
- Designated brokers must maintain a trust account at an FDIC-insured financial institution
- All client funds (earnest money, security deposits, rent) must be deposited into the trust account
- Earnest money must be deposited within 72 hours or end of next banking day after offer acceptance
- Trust account records must be maintained for at least 5 years following transaction
- NREC has authority to audit trust accounts at any time
Nebraska Trust Account Requirements
Nebraska designated brokers must maintain trust accounts to hold client funds separate from their operating 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 FDIC-insured financial institution
- A federally-insured institution
Key Requirement: Each trust account must be maintained in an insured financial institution.
Deposit Requirements
Timeline
| Situation | Deposit Deadline |
|---|---|
| Cooperative sales | Within 72 hours or end of next banking day after acceptance |
| Security deposits | Per lease agreement |
| Rent | Per management agreement |
Proper Deposits
All client funds must be deposited into the designated 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.
Interest-Bearing Accounts
When transferring funds to an interest-bearing account, written authorization must include:
| Required Element | Description |
|---|---|
| Interest recipient | Statement specifying who earns the interest |
| Authorization | Consent from all parties to transfer funds |
| Signatures | Dated signatures from all parties |
| Notice | Statement that interest-bearing accounts are not examined by NREC |
Important: Interest-bearing trust accounts are NOT examined by the Nebraska Real Estate Commission.
Direct Deposits
Direct deposits may be made into a Real Estate Trust Account under NREC rules:
| Requirement | Description |
|---|---|
| Paper trail | Receipt must be sent to broker with remitter's name |
| Audit trail | Documentation must exist for accountability |
| Check issuance | Can only issue checks based on actual trust funds available |
| Timing | Cannot issue checks prior to deposit date if negative balance would occur |
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
- Significant fines
Record Keeping
Required Records
Every designated broker shall maintain and preserve records subject to audit as identified in the NREC Trust Account Manual:
| Record | Description |
|---|---|
| Bank statements | Monthly statements from financial institution |
| Deposit receipts | Documentation of each deposit |
| Check records | Documentation of each disbursement |
| Client ledgers | Individual records for each client |
| Transaction records | All transaction documentation |
Retention Period
| Type of Record | Duration |
|---|---|
| Consummated transactions | 5 years following consummation |
| Listing/agency agreements (no sale) | 5 years after agreement terminated or expired |
Important: Nebraska requires 5-year record retention, which is longer than some states.
NREC Audits
NREC has authority to:
- Audit trust accounts at any time
- Review records during investigations
- Take disciplinary action for violations
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 |
Trade Name Registration
Brokers who operate under any name other than their own must register that name as a "Trade Name" with the Secretary of State:
| Example | Registration Required? |
|---|---|
| "John Smith - Broker" | No |
| "Smith Real Estate Co." | Yes - must register |
Who is authorized to maintain a trust account for client funds in Nebraska?
How long must Nebraska brokers maintain trust account records for a consummated transaction?