Key Takeaways
- Wisconsin brokers must maintain trust accounts at Wisconsin depository institutions for client funds
- All client funds must be deposited within 48 hours of receipt (or next 2 business days)
- Wisconsin requires Interest-Bearing Real Estate Trust Accounts (IBRETA) for client funds
- Trust account records must be maintained for at least 2 years from transaction closing
- DSPS has authority to audit trust accounts at any time
Wisconsin Trust Account Requirements
Wisconsin brokers must maintain trust accounts to hold client funds separate from their operating funds under Wis. Stat. 452.13 and Chapter REEB 18.
Trust Account Basics
What is a Trust Account?
A real estate trust account is a bank account where brokers hold funds belonging to others. Under Wisconsin law:
| Term | Definition |
|---|---|
| Real estate trust account | Account for trust funds at a depository institution from which withdrawals can be made without delay |
| Client funds | Downpayments, earnest money deposits, or other money related to real estate conveyance |
| Trust funds | Money received by licensee belonging to others |
Note: Client funds does NOT include promissory notes.
Types of Trust Accounts in Wisconsin
Wisconsin recognizes three types of real estate trust accounts:
| Type | Purpose |
|---|---|
| Interest-Bearing Common Trust Account | For client funds (required) |
| Non-Interest Bearing Trust Account | For other trust funds |
| Interest-Bearing Trust Account | For specific trust funds other than client funds |
Interest-Bearing Real Estate Trust Accounts (IBRETA)
Since 1993, Wisconsin requires brokers to use Interest-Bearing Real Estate Trust Accounts (IBRETA):
IBRETA Requirements
| Requirement | Details |
|---|---|
| Interest rate | Not less than rate for individual accounts of same type, size, and duration |
| Where interest goes | Remitted to the State of Wisconsin |
| Fund use | Division of Energy, Housing and Community Resources uses for homeless programs |
Key Point: Interest earned on IBRETA accounts does NOT go to the buyer, seller, or broker. It goes to the State of Wisconsin for housing programs.
Deposit Requirements
Timeline
| Situation | Deposit Deadline |
|---|---|
| Standard | Within 48 hours of receipt |
| Before holiday/bank closure | Within next 2 business days |
Proper Handling
All client funds must be deposited into the broker's trust account:
| DO | DO NOT |
|---|---|
| Deposit to broker's trust account | Deposit to salesperson's personal account |
| Deposit within 48 hours | Hold checks uncashed |
| Maintain separate records | Commingle with operating funds |
Critical Rule: Salespersons cannot hold client funds. Only brokers maintain trust accounts.
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 |
| Multiple trust accounts for different purposes | 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
- Disciplinary action by DSPS
Record Keeping
Required Records
Brokers must maintain:
| Record | Description |
|---|---|
| Bank statements | Monthly statements from financial institution |
| Deposit receipts | Documentation of each deposit |
| Disbursement records | Documentation of each withdrawal |
| Client ledgers | Individual records for each client/transaction |
| Transaction records | All supporting documentation |
Retention Period
| Requirement | Duration |
|---|---|
| Trust account records | 2 years minimum from closing |
| If transaction doesn't close | 2 years from listing date |
| Supporting documents | Same as trust account records |
Wisconsin Specific: The 2-year retention period is measured from closing or, if the transaction doesn't close, from the date of listing.
Multiple Trust Accounts
A firm may maintain more than one trust account:
| Situation | Requirement |
|---|---|
| Multiple accounts | Must notify DSPS of all accounts |
| Property management | May have separate account |
| Land contracts | May have separate account |
| All accounts | Must comply with REEB 18 |
Abandoned Funds
If earnest money cannot be disbursed because a party cannot be located:
| Step | Requirement |
|---|---|
| Attempt to locate | Make reasonable attempts to find party |
| Document attempts | Keep records of all efforts |
| After 5 years | Funds deemed abandoned |
| Final step | Submit to Department of Revenue, Unclaimed Property Division |
How soon must client funds be deposited into a Wisconsin broker's trust account?
Where does the interest from Wisconsin IBRETA accounts go?
How long must Wisconsin brokers maintain trust account records?