Key Takeaways
- Brokers must maintain a trust account (escrow account) at a Louisiana-chartered financial institution
- All client funds (earnest money, security deposits, rent) must be deposited into the trust account
- Commingling broker funds with client funds is strictly prohibited
- Trust account records must be maintained for at least 5 years in Louisiana
- LREC has authority to audit trust accounts at any time without notice
Louisiana Trust Account Requirements
Louisiana brokers must maintain trust accounts to hold client funds separate from their operating funds.
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:
- A Louisiana-chartered bank
- A Louisiana credit union
- A federally-insured institution with Louisiana offices
Key Requirement: The account must be designated as a trust or escrow account.
Deposit Requirements
Timeline
| Situation | Deposit Deadline |
|---|---|
| Earnest money | Within 24-48 hours 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.
Maintaining Minimum Balance
Louisiana allows brokers to maintain a small amount of personal funds in the trust account to:
- Cover bank fees
- Prevent accidental overdrafts
- Keep the account open
| Allowed | Amount |
|---|---|
| Personal funds for maintenance | Up to $500 |
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 Recovery Fund
Record Keeping
Required Records
Brokers must maintain:
| Record | Description |
|---|---|
| Bank statements | Monthly statements from financial institution |
| Deposit receipts | Documentation of each deposit |
| Check records | Documentation of each disbursement |
| Client ledgers | Individual records for each client |
| Transaction files | All transaction documentation |
| Reconciliation records | Monthly account reconciliation |
Retention Period
| Requirement | Duration |
|---|---|
| Trust account records | 5 years minimum |
| Transaction files | 5 years minimum |
Note: Louisiana requires 5 years retention—longer than some other states.
LREC Audits
LREC has authority to:
- Audit trust accounts at any time without notice
- 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 reconciliation | Warning to fine |
How long must Louisiana brokers maintain trust account records?
Who is authorized to maintain a trust account for client funds in Louisiana?
When should earnest money be deposited into the broker's trust account?