Key Takeaways
- New Jersey brokers must maintain trust accounts in federally insured New Jersey financial institutions
- Earnest money and security deposits must be deposited within a specified time (business banking day)
- Trust accounts must be reconciled regularly and records retained for 6 years
- Commingling personal and trust funds is prohibited except for minimal amounts to cover bank fees
- Conversion of trust funds is a serious violation that can result in license revocation
Last updated: January 2026
Trust Account Management in New Jersey
Proper handling of client funds is one of the most important responsibilities of a New Jersey real estate broker.
Trust Account Requirements
Account Setup
| Requirement | Detail |
|---|---|
| Account type | Designated trust or escrow account |
| Location | Federally insured NJ financial institution |
| Account name | Must be clearly designated as trust/escrow |
| Interest | May be interest-bearing with proper handling |
| Registration | Must be registered with NJREC |
Types of Funds Held in Trust
| Fund Type | Description |
|---|---|
| Earnest money | Contract deposits |
| Security deposits | Rental property deposits |
| Rent collections | Property management collections |
| Down payments | Advance payments |
Deposit Timing
When to Deposit
Trust funds must be deposited promptly:
| Situation | Timing |
|---|---|
| Upon receipt | Next business banking day |
| Contract specifies | As agreed in contract |
| Check received | When check is received |
What Counts as Receipt
A broker "receives" funds when:
- Check is physically received
- Wire transfer is confirmed
- Cash is received (discouraged)
Best Practice: Avoid handling cash. Request checks or electronic transfers.
Prohibited Practices
Commingling
Commingling is mixing trust funds with personal or business operating funds:
| Rule | Explanation |
|---|---|
| Strictly prohibited | Cannot mix trust and operating funds |
| Exception | Small amount for bank service charges |
| Amount | Only what's needed for fees |
Conversion
Conversion is using trust funds for personal purposes:
| Consequence | Description |
|---|---|
| License revocation | Most common outcome |
| Criminal charges | Potential for prosecution |
| Civil liability | Must repay funds plus damages |
| Recovery Fund claim | May result in claims |
Premature Disbursement
Brokers cannot release trust funds until:
- Transaction closes
- Parties agree to release
- Court orders release
Trust Account Maintenance
Reconciliation Requirements
| Task | Frequency |
|---|---|
| Bank reconciliation | Monthly (minimum) |
| Trial balance | Monthly |
| Record retention | 6 years |
Reconciliation Process
- Compare bank statement to broker records
- Identify all deposits and disbursements
- Verify all funds are accounted for
- Document reconciliation
- Broker reviews and signs off
NJREC Audits
NJREC may audit trust accounts:
- Randomly
- In response to complaints
- During license renewal
- As part of investigation
Earnest Money Disputes
When buyer and seller dispute earnest money:
| Step | Action |
|---|---|
| 1 | Hold funds - do NOT release |
| 2 | Document the dispute |
| 3 | Attempt resolution |
| 4 | If no resolution - interpleader |
| 5 | Court determines owner |
Interpleader Action
An interpleader allows the broker to:
- Deposit funds with the court
- Remove themselves from the dispute
- Let the court determine rightful owner
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Test Your Knowledge
How long must New Jersey brokers retain trust account records?
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Test Your Knowledge
When buyer and seller dispute earnest money, what should the broker do?
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Test Your Knowledge
What is conversion in the context of trust accounts?
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