Key Takeaways
- Brokers must maintain a trust account at an FDIC-insured financial institution
- All client funds (earnest money, security deposits, rent) must be deposited into the trust account
- Commingling broker funds with client funds is prohibited (except for a small amount to maintain the account)
- Trust account records must be maintained for at least 3 years
- AREC has authority to audit trust accounts at any time
Alaska Trust Account Requirements
Alaska brokers must maintain trust accounts to hold client funds separate from their operating funds under Alaska Statutes Title 8 Chapter 88.
Trust Account Basics
What is a Trust Account?
A trust account (also called an escrow account) is a bank account where brokers hold funds belonging to others:
| Fund Type | Examples |
|---|---|
| Earnest money deposits | Buyer's good faith deposit |
| Security deposits | Tenant deposits on rentals |
| Rent collections | Collected on behalf of landlords |
| Other client funds | Closing proceeds pending disbursement |
Where to Open
Trust accounts must be at:
- An FDIC-insured bank or savings institution
- A credit union with comparable insurance
- A financial institution doing business in Alaska
Key Requirement: The account must clearly identify it as a trust account, not the broker's personal or operating account.
Deposit Requirements
Timeline
| Situation | Deposit Deadline |
|---|---|
| Earnest money | Per contract terms (typically 3-5 business days of acceptance) |
| Security deposits | Per lease agreement |
| Rent | Per management agreement |
Proper Deposits
All client funds must be deposited into the broker's trust account—not:
- Salesperson's personal account
- Broker's operating account
- Any other non-trust account
Critical Rule: Salespersons cannot hold client funds. Only brokers maintain trust accounts.
Account Balance Requirements
The trust account must always contain sufficient funds to cover all client obligations:
| Rule | Requirement |
|---|---|
| Minimum balance | Total of all client funds held |
| Broker's funds | May keep small amount (usually $100-$500) to maintain account |
| Interest | Handle per written agreement with parties |
Prohibited Practices
Commingling
Commingling is mixing client funds with broker's personal or business funds. It is strictly prohibited.
| Allowed | NOT Allowed |
|---|---|
| Client funds in trust account | Client funds in operating account |
| Small broker deposit to maintain account | Large broker funds in trust account |
| Interest earned (per agreement) | Using client funds for business expenses |
Conversion
Conversion is using client funds for unauthorized purposes. It is a serious violation that can result in:
- License revocation
- Criminal charges
- Civil liability
- Payment from Surety Fund
- Requirement to repay fund
Record Keeping
Required Records
Brokers must maintain detailed trust account records:
| Record | Description |
|---|---|
| Bank statements | Monthly statements from financial institution |
| Deposit records | Documentation of each deposit |
| Disbursement records | Documentation of each disbursement |
| Client ledgers | Individual records for each client/transaction |
| Transaction files | All documentation for each transaction |
| Reconciliation records | Monthly reconciliation of accounts |
Retention Period
| Requirement | Duration |
|---|---|
| Trust account records | 3 years minimum |
| Transaction files | 3 years minimum |
| Closed transaction files | 3 years from closing |
AREC Audits
AREC has authority to:
- Audit trust accounts at any time
- Review records during investigations
- Take disciplinary action for violations
Common Audit Findings
| Issue | Consequence |
|---|---|
| Shortage of funds | Serious violation—potential revocation |
| Poor record keeping | Warning to suspension |
| Late deposits | Warning to fine |
| Commingling | Fine to revocation |
| Missing records | Warning to suspension |
| Failure to reconcile | Warning to fine |
Who is authorized to maintain a trust account for client funds in Alaska?
How long must Alaska brokers maintain trust account records?