4.1 South Carolina Trust Account Requirements

Why Trust Accounts Exist

Under S.C. Code Section 40-57-136, every broker-in-charge (BIC) and property manager-in-charge (PMIC) who handles money belonging to others must keep that money in a trust account (also called an escrow account). The legal theory is simple: the money is not yours, so it cannot sit where your creditors, your business expenses, or your bank's right of setoff can reach it. The trust account is a firewall between client funds and firm funds.

What money must be deposited

Account setup rules

Who can hold the account? Only the BIC or PMIC. An ordinary associate (salesperson) or even a licensed broker who is not designated BIC cannot open a firm trust account. An associate who receives earnest money must hand it to the BIC no later than the next business day, and the BIC's deposit clock then runs from the date the BIC receives it.

Worked example: the deposit clock

A buyer signs a contract on Friday and hands a personal check for earnest money to the listing agent that afternoon. Saturday, Sunday, and a Monday bank holiday follow. Because the 48-hour count excludes Saturdays, Sundays, and bank holidays, the broker's deposit deadline does not begin running through the weekend and holiday — the broker must deposit the check within 48 counted hours after the agreement is signed. Memorize the exclusion: exam questions love to bury a weekend inside the timeline to see whether you count calendar hours or business hours.

Deposit Timelines (Memorize These)

South Carolina draws a line between cash/certified funds (which are good immediately) and checks (which can bounce). The rule under 40-57-136:

Saturdays, Sundays, and bank holidays are excluded from every 48-hour count. The check rule keys to the signing of the agreement rather than to receipt because earnest money checks are often collected before both parties have fully signed; the broker should not deposit a buyer's check until there is a binding contract to attach it to.

Commingling vs. Conversion (The Two Big Traps)

These two terms are tested on nearly every SC license exam and students confuse them constantly.

Commingling means mixing client money with the broker's own personal or business money — for example, depositing earnest money into the firm's operating account, or leaving sale proceeds in a personal checking account. It is prohibited even if no money is lost.

Conversion means taking or using client money for an unauthorized purpose — paying the office electric bill out of the trust account, or "borrowing" from it with every intention of paying it back. Conversion is theft of trust funds and is the single most serious violation a BIC can commit.

Trap: Intent to repay is not a defense to conversion. The moment client money is used for an unauthorized purpose, the violation is complete. Conversion can lead to license revocation and criminal prosecution for embezzlement, distinct from any SCREC discipline.

Records, Reconciliation, and Audits

The BIC must maintain bank statements, deposit slips, canceled checks, a separate ledger for each client or property, and monthly reconciliations that tie the bank balance to the sum of the individual client ledgers (the three-way reconciliation: bank balance = book balance = total of client sub-ledgers). SCREC, through LLR investigators, may audit the account and inspect records without advance notice.

Keep records long enough to satisfy SCREC review — firms commonly retain trust and transaction files for several years so an auditor can trace any deposit from receipt to disbursement.