Key Takeaways
- Massachusetts brokers must maintain a separate trust (escrow) account for client funds
- Trust accounts must be in a Massachusetts bank or savings institution
- Commingling personal funds with client funds is prohibited
- Brokers must maintain complete records of all trust account transactions
- Interest-bearing accounts require special authorization from clients
Last updated: January 2026
Trust Account Requirements
Massachusetts requires brokers to properly handle client funds through trust (escrow) accounts.
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Trust Account Basics
Account Requirements
| Requirement | Details |
|---|---|
| Separate account | Cannot be personal account |
| Massachusetts bank | Must be in MA |
| Account title | Must identify as trust account |
| FDIC insured | Bank must be insured |
| Demand deposit | Must be readily accessible |
Account Titling
The trust account must be titled to show:
| Element | Example |
|---|---|
| Broker name | "ABC Realty" |
| Trust designation | "Trust Account" or "Escrow Account" |
| Full title | "ABC Realty Trust Account" |
What Belongs in Trust Account
Client Funds
| Deposit Type | Example |
|---|---|
| Earnest money | Buyer deposits |
| Security deposits | Rental deposits |
| Rent collected | For property management |
| Other client funds | As required |
What Does NOT Belong
| Do Not Deposit | Reason |
|---|---|
| Personal funds | Commingling |
| Commission (before earned) | Not yet due |
| Operating expenses | Business account |
| Personal savings | Commingling |
Trust Account Rules
Prohibited Practices
| Prohibited | Consequence |
|---|---|
| Commingling | License discipline |
| Conversion | Criminal charges possible |
| Unauthorized withdrawals | License revocation |
| Interest diversion | Unless authorized |
Commingling vs. Conversion
| Term | Definition |
|---|---|
| Commingling | Mixing personal and client funds |
| Conversion | Using client funds for personal use |
KEY EXAM POINT: Commingling is mixing funds; conversion is stealing/using them. Both are violations, but conversion is more serious.
Record Keeping
Required Records
| Record | Purpose |
|---|---|
| Ledger | Track all transactions |
| Bank statements | Monthly reconciliation |
| Deposit receipts | Proof of deposit |
| Disbursement records | Track withdrawals |
| Client ledger | Per-client balances |
Retention Period
| Document | Keep For |
|---|---|
| Trust records | 3 years minimum |
| Transaction files | 3 years after closing |
| Reconciliations | 3 years |
Interest-Bearing Accounts
IOLTA (Interest on Lawyers Trust Accounts)
| Feature | Details |
|---|---|
| Purpose | Small deposits, short term |
| Interest goes | To legal aid programs |
| No client authorization | For qualifying funds |
Client Interest
| Situation | Requirement |
|---|---|
| Large deposits | May require client authorization |
| Long-term holds | Interest may go to client |
| Written agreement | Document arrangements |
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Test Your Knowledge
What is the difference between commingling and conversion?
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Test Your Knowledge
Where must a Massachusetts broker maintain a trust account?
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B
C
D