Trust Fund Handling Chapter 11

Trust Funds Overview

• Trust funds can include cash, notes, and personal property.
• Proper designation of a trust account protects funds from the broker's creditors.

Trust Account Designation

• Trust accounts must be labeled as such to ensure legal protection and proper fund management.
• Designation prevents brokers from facing tax liabilities on deposited funds.

Handling of Beneficiary Funds

• Brokers can place funds from multiple beneficiaries in either an interest-bearing or non-interest-bearing account.
• It's acceptable to choose between those options based on circumstances.

Interest-Bearing Accounts Regulations

• Brokers cannot personally benefit from interest earned on trust accounts.
• Trust accounts holding funds must be insured by FDIC.
• Separate interest-bearing accounts for each beneficiary are not required.

Mandatory Interest-Bearing Trust Accounts

• Accounts with loan repayments received before due dates are deemed as trust accounts.
• Purchase deposits for one-to-four residential units require interest-bearing trust accounts.
• Impound account funds for taxes and insurance also necessitate interest-bearing status.

Deposit Requirements

• Advance fees and impound account collections require deposits into trust accounts.
• Brokers must ensure compliance with regulations regarding fund handling.

Escrow Duties of Brokers

• Brokers acting as escrow must deposit received funds in a trust account.
• Disbursement of funds requires written instructions from the depositing party.
• Brokers are obligated to provide detailed written statements for all receipts and disbursements.

Personal Funds in Trust Accounts

• Keeping personal funds in a trust account may be necessary to cover bank fees.
• Maintaining personal funds helps brokers avoid commingling, which is illegal.

Understanding Commingling

• Commingling occurs when trust funds are mixed with personal funds or used for personal expenses.
• Acceptable practices exclude both holding cash deposits personally and mixing trust funds with personal accounts.

Authorized Withdrawals

• Withdrawals from a broker's trust account can be conducted by licensed personnel.
• Unlicensed employees can withdraw funds if they are specifically authorized and bonded.

Trust Funds Overview

• Trust funds can include cash, notes, and personal property.
• Proper designation of a trust account protects funds from the broker's creditors.

Trust Account Designation

• Trust accounts must be labeled as such to ensure legal protection and proper fund management.
• Designation prevents brokers from facing tax liabilities on deposited funds.

Handling of Beneficiary Funds

• Brokers can place funds from multiple beneficiaries in either an interest-bearing or non-interest-bearing account.
• It's acceptable to choose between those options based on circumstances.

Interest-Bearing Accounts Regulations

• Brokers cannot personally benefit from interest earned on trust accounts.
• Trust accounts holding funds must be insured by FDIC.
• Separate interest-bearing accounts for each beneficiary are not required.

Mandatory Interest-Bearing Trust Accounts

• Accounts with loan repayments received before due dates are deemed as trust accounts.
• Purchase deposits for one-to-four residential units require interest-bearing trust accounts.
• Impound account funds for taxes and insurance also necessitate interest-bearing status.

Deposit Requirements

• Advance fees and impound account collections require deposits into trust accounts.
• Brokers must ensure compliance with regulations regarding fund handling.

Escrow Duties of Brokers

• Brokers acting as escrow must deposit received funds in a trust account.
• Disbursement of funds requires written instructions from the depositing party.
• Brokers are obligated to provide detailed written statements for all receipts and disbursements.

Personal Funds in Trust Accounts

• Keeping personal funds in a trust account may be necessary to cover bank fees.
• Maintaining personal funds helps brokers avoid commingling, which is illegal.

Understanding Commingling

• Commingling occurs when trust funds are mixed with personal funds or used for personal expenses.
• Acceptable practices exclude both holding cash deposits personally and mixing trust funds with personal accounts.

Authorized Withdrawals

• Withdrawals from a broker's trust account can be conducted by licensed personnel.
• Unlicensed employees can withdraw funds if they are specifically authorized and bonded.