4.1 Vermont Trust Account Requirements

Why Trust Accounts Dominate the State Exam

The Vermont salesperson exam has two parts: a 100-question PSI national portion (about 75% to pass) plus a 50-question open-book Vermont state-law portion administered by OPR during the online license application. Trust-account handling under Title 26, Chapter 41, Section 2214 is the densest source of state questions because it mixes hard numbers (five banking days, 10 days) with judgment scenarios (individual vs pooled interest). Expect at least two or three items here.

A trust account (also called an escrow account) is a bank account where a broker holds money that belongs to other people — not the broker. The broker is a temporary custodian, never the owner of these funds.

Who Holds the Money

This is a classic trap. Only a broker maintains a trust account. A salesperson who receives an earnest-money check must promptly turn it over to the supervising broker; the salesperson never opens or controls a trust account and never deposits client funds into a personal account. If a question shows a salesperson depositing earnest money into their own checking account, that is conversion — a revocation-level violation.

Where the Account May Be Held

• A bank authorized to do business in Vermont
• A financial institution or credit union operating in Vermont
• The account must be a separate, identifiable trust/escrow account — not the brokerage operating account

Vermont-specific: A brokerage that holds funds of others must maintain a pooled interest-bearing trust account as its default, and direct that the interest flow to the Vermont Housing Finance Agency.

Deposit Timing and Commission Notification

Vermont sets two bright-line deadlines you must memorize cold. Mixing them up is the most common exam error in this topic.

Banking days exclude weekends and bank holidays — so a deposit received Friday before a Monday holiday may not be "late" on the following Wednesday. The notification to the Commission must include the name and location of the financial institution holding the account.

Worked Example

A salesperson receives a $5,000 earnest-money check on a Thursday. The brokerage is closed Friday for a staff retreat, and the bank is closed Saturday and Sunday. Banking-day count starts on the next banking day. The broker still has the standard five-banking-day window measured in banking days, so a deposit the following week is timely. Compare this with a broker who simply leaves the check in a desk drawer for three weeks — that is a clear § 2214 violation regardless of intent.

Individual vs Pooled Interest-Bearing Accounts

Vermont requires the broker to decide where interest should go based on whether the deposit will earn a substantial amount of interest.

For an individual account, the contract must state — conspicuously, above the signature lines — how the interest is distributed depending on the outcome:

For a pooled account, the financial institution remits accumulated interest to the Vermont Housing Finance Agency (per 8 V.S.A. § 14210) for its single-family home mortgage programs; the bank may deduct a reasonable remittance fee. The broker must tell the depositor which account type holds the funds and keep a signed written disclosure statement from the beneficial owner.

Vermont-specific & heavily tested: The pooled-interest-to-VHFA rule is unique to Vermont. If an answer choice sends pooled interest to the broker, the buyer, or VREC, it is wrong.

Prohibited Practices, Withdrawals, and Records

Commingling vs Conversion

• Commingling — mixing client funds with the broker's personal or operating funds. Prohibited, with one narrow exception: a nominal amount of the broker's own money may sit in the trust account solely to keep it open or cover bank service fees.
• Conversion — actually using client funds for an unauthorized purpose (e.g., paying office rent out of earnest money). This is the most serious money violation and routinely leads to revocation and criminal referral.

Withdrawal and Check Rules

Contract deposits may not be withdrawn from the trust account until one of these occurs:

1. The contract is terminated by performance (the deal closes), or
2. The contract terminates by its own terms (e.g., a financing contingency fails), or
3. All parties agree in writing how the funds are released.

No check may be drawn against uncollected funds — a broker cannot disburse against an earnest-money check that has not yet cleared. When the parties dispute who gets the deposit, the broker must hold the money and may not unilaterally decide; releasing without written agreement is itself a violation.

Record Keeping and Inspection

Quick-Reference: Common Violations and Likely Outcomes

Exam trap: A broker who keeps perfect records but disburses a disputed deposit without written agreement of all parties has still violated § 2214 — good records do not cure an improper release.