We are a property management LLC, and manage properties for others.
Someone recommended we have a Trust checking account for the
protection of funds we receive and manage for others. What is a Trust
account or Fiduciary Trust account, how do we start one and use one.

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Request for Question Clarification by richard-ga on 04 Mar 2005 17:21 PST

Can you tell me in what U.S. state your office is located?
Thanks

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Clarification of Question by restyle-ga on 05 Mar 2005 04:31 PST

We are located in Ohio.

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Request for Question Clarification by pafalafa-ga on 05 Mar 2005 06:29 PST

Hello restyle-ga,

If you don't mind my asking, what are you currently doing with the
funds that you receive on behalf of your clients?

A trust account is specifically designed for the type of situation you
describe -- where one person is holding property "in trust" that
belongs to another.  In general, these funds should not be co-mingled
with other funds that are not held in trust, that is, funds that you
have full control over.

I'm looking into your question, and hope to be able to provide an
answer for you later today.  If you want to provide any additional
information on your current situation, feel free to do so, as it may
help in focusing my research.

Thanks,

pafalafa-ga

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Clarification of Question by restyle-ga on 05 Mar 2005 10:44 PST

Currently we have a common checking account that receives all funds,
both ours and our clients. I have the understanding that the Tust
account is how we should be handling the funds, but am not sure how to
set one up or what else I should know about them.

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Request for Question Clarification by pafalafa-ga on 06 Mar 2005 08:38 PST

restyle-ga,

This has turned out to be an unexpectedly slippery topic.

On the one hand, the answer to your question is probably very simple: 
Go to a bank, and tell them you want to open a trust checking account,
and they'll walk you through the rest.

On the other hand, the actual law underlying such accounts is harder
to pin down (n fact, I'm not even convinced the account needs to be in
Ohio, even though your business is, though there's no clear advantage
to going outside of Ohio either).

One thing that is clear is that co-mingling your finds and client
funds is a no-no, so you should certainly rectify this situation.

There also appear to be accounting and record-keeping implication of
having a trust account -- again, your bank should be able to help you
on this.

A page that might be helpful to you is this one:


http://www.com.state.oh.us/real/NEW%20BROKER%20GUIDE/NewGuide.html


and you may want to even contact them for additional guidance.



All the best,


pafalafa-ga

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Clarification of Question by restyle-ga on 09 Mar 2005 07:56 PST

Does a Trust checking Account require a trust agreement and trustee
and EIN, or is it less formal. Also is there a difference between a
trust account and fiduciary trust account?

If you are collecting rents on behalf of the owners of property in
California, you may be facing a threshold issue of whether you need a
real estate broker's license to engage in that activity at all.  Here
is the relevant section of the California Business and Professions
Code:

"10131.  A real estate broker within the meaning of this part is a
person who, for a compensation or in expectation of a compensation,
regardless of the form or time of payment, does or negotiates to do
one or more of the following acts for another or others:
   
.   .   .   .
   
"(b) Leases or rents or offers to lease or rent, or places for
rent, or solicits listings of places for rent, or solicits for
prospective tenants, or negotiates the sale, purchase or exchanges of
leases on real property, or on a business opportunity, or collects
rents from real property, or improvements thereon, or from business
opportunities."

California Business and Professions Code: Section 10131 b)
http://www.leginfo.ca.gov/cgi-bin/waisgate?WAISdocID=3925404461+0+0+0&WAISaction=retrieve

(Please note that comment is not intended as legal advice.)

Correction --

I mistakenly thought your office was in California, not Ohio (don't
ask me why), so the citation in my comment obviously doesn't cover
your situation.