Real estate agencies hold many millions of dollars in their trust accounts. These funds are held ‘in trust’ for clients and customers of the agency. It is one of the fiduciary duties of an agent to keep their clients’ funds safe. A fiduciary duty is the highest standard of care in equity or law.
Why a Secure Trust Account Is Crucial for Real Estate Agents
A real estate agent is required to act in good faith and with loyalty to a client’s best interests. Additionally, an agency must take every reasonable precaution to protect the integrity of client deposits. With that in mind, having a secure trust account is critical for the success of every real estate agent.
A secure trust account allows the agent to hold client funds without having to worry about how to protect them. Essentially, having a secure trust account ensures that the agent never has to worry about losing a client’s money.
What Is a Secure Trust Account?
A secure trust account is one that is held by a financial institution in a manner that will ensure clients’ funds are kept safe. This trust account is segregated from the agency’s operating account. An agency may open a trust account in order to meet its fiduciary obligations to both its clients and the real estate industry.
Keep in mind that removing money from the trust account for any other reason beyond the client’s request will be considered a criminal offence. That’s why every real estate agent needs to stay on top of their trust accounts and follow the best practices that can give peace of mind to all parties involved.
How Do You Securely Manage Trust Accounts?
Tip #1: Track and Report Everything that Goes In or Out of the Trust Account
Each time an individual deposits money or checks into a trust account, the agent should prepare a proper records document. This document should include their signature, the date, and a statement describing the transaction (such as “cash deposit $10,000”). These records should be kept in a safe or secure location.
Tip #2: Set Strict Rules Regarding Processes and Procedures
Firms should establish strict rules for the handling of trust accounts. This includes everything from how cash deposits are made to how withdrawals are processed. In addition, these rules should be clearly communicated to all real estate agents handling trust accounts.
Tip #3: Assign Key Roles to Manage the Responsibility of Processing Trust Accounts
Trust account management, processing, and reporting can be extremely complex. It is important for the company to assign specific roles to those who are managing trust accounts. This will help to ensure all areas of the trust accounts are being properly handled.
Assigning roles will also mitigate common pitfalls such as absenteeism, errors, or something graver like money laundering, misreporting, and insider theft.
The Bottom Line: The Importance of a Secure Trust Account for Real Estate Agents
A secure trust account allows agents to manage all aspects of their clients’ and customers’ funds with the peace of mind that they are working in their best interest. This is especially useful in the real estate industry where client funds are frequently being transferred in and out of trust accounts. Because of this, it is important for agents to understand how to properly secure their trust accounts.
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