California specifics
Trust account compliance checklist
These are the rules that end careers. Trust fund handling produces more DRE discipline than any other single subject, and it sits inside the 25% content area, so it is heavily examined as well as heavily enforced.
Deposit by the end of the next business day after receipt
Into a trust account, into the hands of the principal, or into a neutral escrow depository. Business days, not calendar days, so a Friday receipt is due Monday.
Never deposit trust funds into a personal or general account
That is commingling, and it is a violation even if not a dollar is spent. Using the money is conversion, which is far more serious.
A salesperson never holds trust funds in their own name
Funds a salesperson receives come under the broker's control immediately and must be delivered to the broker.
Broker funds in the trust account are capped at $200
Permitted solely to cover bank service charges. This is the only recognised exception to the rule against mixing funds.
Keep a separate record for each beneficiary or transaction
Plus a control record covering every receipt and disbursement across the whole account. A single ledger cannot show whose money is whose.
Reconcile at least monthly, and keep the reconciliation
The beneficiary records must be reconciled against the bank record and against the control record. A shortage of any size is visible to an auditor.
Retain records for three years
Running from the closing date, or from the listing date if there was no closing. Electronic storage is acceptable if legibly reproducible.
Only authorised persons may withdraw
The broker, a licensee authorised in writing, or an unlicensed employee covered by a fidelity bond at least equal to the maximum trust funds accessible.
Interest belongs to the principal
An interest-bearing trust account is permitted at the principal's request, and the broker may never take the interest on client money.
Follow a written instruction to hold a cheque uncashed
A buyer may instruct in writing that a deposit be held until acceptance, and following that instruction is lawful. This is a permitted destination, not a violation.
Why this list matters beyond the exam
When the Real Estate Recovery Fund pays a claim on a licensee's behalf, that licence is automatically suspended until the Fund is reimbursed in full with interest. The suspension is automatic rather than discretionary, and conversion of trust funds is one of the four grounds a Fund claim can rest on.
How this is calculated
Trust funds are money or anything of value a broker receives on behalf of someone else in a transaction requiring a licence. The defining characteristic is that none of it is the broker's money, at any point, for any length of time.
Two violations are constantly confused. Commingling is mixing trust money with the broker's own, and it happens the moment client funds touch a general account, whether or not anything is spent. Conversion is spending it. Conversion supports a Real Estate Recovery Fund claim and criminal liability, and it is the shorter route to revocation. Read the verb in any fact pattern: deposited versus used.
The full treatment, including the record-keeping regime and how it interacts with supervision duties, is in Practice of Real Estate and Disclosures.