4.1 West Virginia Trust Account Requirements
Key Takeaways
- Under WV Code §30-40-18 a broker who holds money belonging to others must maintain a trust (escrow) account at a federally insured financial institution
- Only brokers maintain trust accounts; salespersons must turn over all client funds to the supervising broker
- Funds must be deposited immediately or by the next business day per the contract, and the institution must consent to WVREC examination and NSF notification
- A broker may not commingle, but may deposit up to $100 of personal funds to keep the account open; using client money for the broker’s purposes is conversion
- Brokers must keep client ledgers, deposit and disbursement records, and monthly reconciliations open to WVREC inspection, and notify the Commission within 10 days of opening or changing an account
West Virginia brokers who hold money that belongs to others must keep it in a trust (escrow) account, strictly separate from the brokerage’s operating funds. The governing statute is WV Code §30-40-18, supplemented by the Title 174 rules.
What a Trust Account Holds
| Fund type | Examples |
|---|---|
| Earnest money | A buyer’s good-faith deposit |
| Security deposits | Tenant deposits on managed rentals |
| Rent collections | Rent collected for landlord clients |
| Auction proceeds | Funds from real estate auctions |
| Escrow funds | Money held pending closing |
When a Trust Account Is Required
A broker must maintain a trust account whenever the broker holds money in trust for another party and does not immediately deliver it to the owner or a neutral escrow depository. A broker who never holds client funds — for instance, one whose deposits always go straight to a title company — is not required to maintain a trust account. The trigger is holding other people’s money, not merely being a broker.
Where and How the Account Is Held
| Requirement | Detail |
|---|---|
| Institution | A federally insured financial institution (FDIC/NCUA) |
| Consent | The institution signs WVREC’s Trust Fund Account Statement and Consent to Examine |
| Insurance ceiling | Funds in one account should not exceed the federal insurance limit |
| Excess funds | Use multiple insured accounts or a sweep arrangement so all funds stay insured |
| Commission notice | Notify WVREC within 10 days of establishing or modifying a trust account |
The consent statement is important: by signing it, the bank agrees that WVREC may examine the account and agrees to notify the Commission of NSF (insufficient-funds) items. This gives the Commission an early-warning system for trust-account trouble.
Deposit Timing
| Situation | Deposit deadline |
|---|---|
| Standard earnest money | Immediately or by the next business day, per the contract |
| Contract specifies otherwise | Per the contract’s terms |
| Security deposits / rent | Per the lease or management agreement |
Critical rule: Only brokers hold trust accounts. A salesperson who receives client funds must promptly turn them over to the supervising broker for deposit. A salesperson who parks a buyer’s earnest-money check in a personal or desk drawer has set up a violation.
Commingling and Conversion — The Two Cardinal Sins
Commingling
Commingling is mixing client trust funds with the broker’s own personal or business funds. It is prohibited. There is one narrow allowance: a broker may deposit up to $100 of the broker’s own money into the trust account to cover bank service charges and maintain the minimum balance so the account stays open. Anything beyond that minimal cushion is impermissible commingling.
| Allowed | NOT allowed |
|---|---|
| Client funds in the trust account | Client funds in the operating account |
| Up to $100 of broker funds to maintain the account | Large broker balances parked in the trust account |
| Interest handled per written agreement | Paying brokerage expenses out of trust funds |
Conversion
Conversion is using client trust funds for an unauthorized purpose — effectively spending other people’s money. It is far more serious than a paperwork lapse and can result in license revocation, criminal charges, civil liability, and restitution. On the exam, distinguish commingling (improperly mixing funds) from conversion (improperly using the funds).
Interest-Bearing Trust Accounts
Trust funds may be placed in an interest-bearing account only when authorized: the parties must agree in writing on placing the funds in such an account and on who receives the interest. Absent that written authorization (and any required Commission approval), trust funds are held in a non-interest account and the broker may never keep interest earned on client money.
Records and Reconciliation
Brokers must maintain complete trust-account records:
| Record | Purpose |
|---|---|
| Bank statements | Monthly statements from the institution |
| Deposit records | Date and source of every deposit |
| Disbursement records | Date and payee of every disbursement |
| Client/transaction ledgers | A separate running balance for each client or transaction |
| Reconciliation records | Monthly reconciliation of ledgers to the bank balance |
The statute requires records showing, for each item, the date and from whom money was received, the date deposited, the date of withdrawal, and to whom the money belongs. All records must remain open to inspection by WVREC at the broker’s place of business during normal business hours. A broker should be able to demonstrate at any moment that the sum of the individual client ledgers equals the bank balance — a shortfall means client money is missing.
WVREC Oversight and Audits
WVREC may audit trust accounts at any time, not only when a complaint is filed. Common audit findings escalate with severity:
| Finding | Typical consequence |
|---|---|
| Shortage of funds | Serious — potential revocation |
| Conversion | Revocation and possible criminal charges |
| Commingling | Fine to revocation |
| Poor record keeping | Warning to suspension |
| Late deposits | Warning to fine |
Exam takeaway: A trust-account shortage is treated as presumptive evidence of conversion or gross negligence and is one of the fastest routes to license revocation in West Virginia.
When must a West Virginia broker deposit earnest money into the trust account?
Who is authorized to maintain a trust account for client funds in West Virginia?
How much of the broker’s own money may be deposited into the trust account, and why?
What is the difference between commingling and conversion?