Commingling is mixing trust money with the broker's own funds — for example, combining the operating account and the trust account. It is prohibited because it breaks the required separation of client money from the broker's money.

What money counts as trust money?

A client's money, earnest money, rent, unearned fees, security deposits, or any money held on behalf of another person. The defining feature is that the money belongs to someone other than the broker.

Does a broker have to keep separate trust accounts for each client?

No. A broker may maintain separate trust accounts for different clients or types of trust money but is not required to. The broker remains responsible for the account either way.

Who gets the interest if trust money is in an interest-bearing account?

Unless an agreement signed by the depositing party says otherwise, the interest is distributed to the parties to whom the money is disbursed — not retained by the broker.

Texas Real Estate Exam: Escrow and Trust Accounts

TL;DR

In Texas, money a broker holds for someone else — earnest money, rent, security deposits, unearned fees — is trust money, and it must be kept in a designated trust account or delivered to an authorized escrow agent. The rules come from Texas Administrative Code Rule 535.146. The exam favorites: a sales agent may never maintain a trust account and must hand trust money straight to the sponsoring broker; under Rule 535.146, earnest money accepted by a broker must be deposited in a trust account or delivered to an authorized escrow agent by the close of business of the second working day after the broker receives the trust money, unless the principals agree otherwise in writing; and mixing trust money with the broker's own operating funds is commingling, which is prohibited. This broker-handling deadline is separate from the buyer's own deadline to deliver earnest money under a TREC residential contract. Expect a question or two on these points.

Why escrow and trust accounts are on the exam

Handling other people's money is one of the clearest fiduciary duties a license holder has, and the Texas exam tests it because mishandling trust money is among the fastest ways a broker loses a license. The topic blends three things the exam likes to combine: a fiduciary principle, a specific rule with concrete numbers, and a clean dividing line between what a broker can do and what a sales agent can do. Get those three straight and the questions become predictable.

The governing rule is Rule 535.146 of the Texas Administrative Code, titled "Maintaining Trust Money." It defines the terms, sets the timelines, and assigns responsibility. For how this fits into a broker's wider regulatory obligations, see our guide to Texas license law and its key rules.

What counts as trust money

Rule 535.146 defines trust money broadly. It is a client's money, earnest money, rent, unearned fees, security deposits, or any money held on behalf of another person. The common thread is ownership: the money does not belong to the broker. The broker is holding it for someone else and will eventually deliver it to whoever is entitled to it.

A trust account, in turn, is an account managed by one party for the benefit of another, held in a banking institution authorized to do business in Texas. The phrase "for the benefit of another" is the heart of the concept. The broker controls the account but does not own its contents.

Trust money is held in a fiduciary capacity

Any trust money a broker accepts is held in a fiduciary capacity. That single phrase carries the whole weight of the topic. A fiduciary must put the other person's interests first, keep that person's property separate from their own, and account for it accurately. When a broker accepts earnest money, the broker is not receiving income — the broker is taking custody of someone else's property and accepting a duty to safeguard it.

Trust money accepted by a broker must be maintained in a designated trust account maintained by the broker, or delivered to an escrow agent authorized in Texas, in accordance with the agreement of the principals. In a typical Texas sale the earnest money goes to a title company acting as escrow agent, rather than into the broker's own account — but when a broker does hold trust money, the trust-account rules apply in full.

The sales agent rule: no trust account

This is the single most tested point in the topic. A sales agent shall not maintain a trust account. Any trust money a sales agent receives must be immediately delivered to the sales agent's sponsoring broker, or handled exactly as the sponsoring broker directs.

The logic follows from how Texas licensing works. A sales agent always acts under the supervision of a sponsoring broker, and the broker — not the agent — carries ultimate responsibility for client funds. So if a buyer hands an earnest money check to a sales agent, the agent does not deposit it, does not hold it, and does not open an account for it. The agent delivers it to the broker without delay. If an exam question describes a sales agent opening or keeping a trust account, that scenario is wrong on its face. This division of responsibility mirrors the broader supervisory structure explained in our guide to agency and fiduciary duties in Texas.

The broker's deposit deadline

Timing is a favorite for numeric exam questions. Under Rule 535.146, if a broker accepts earnest money, the broker must deposit it in a trust account or deliver it to an authorized escrow agent by the close of business of the second working day after the date the broker receives the trust money, unless a different time is expressly agreed upon in writing by the principals to the transaction.

Two details matter. The clock starts when the broker actually receives the trust money — not on the effective date of the contract — and it counts working days, so weekends and holidays do not extend it. The default deadline can be changed, but only by a written agreement of the principals; a casual understanding does not extend it.

One distinction is worth keeping clear. This second-working-day rule is a broker trust-money handling rule under Rule 535.146 — it governs what a broker must do once the broker has accepted earnest money. It is not the buyer's deadline to deliver earnest money. Under a modern TREC residential contract, the buyer's obligation is to deliver the earnest money to the escrow agent or title company within the contract's own deadline, and if the buyer fails to do so, the seller gains remedies under the contract. Do not confuse the broker-handling deadline (which starts when the broker receives the money) with the buyer's separate contract delivery deadline (which starts on the effective date). For how the buyer's delivery works, see our explanation of earnest money in Texas contracts.

Commingling: the cardinal sin

Commingling occurs when a broker mixes trust money with the broker's own funds — most plainly, when the broker's operating account and trust account are combined, or when trust money is deposited into the broker's general business account. It is prohibited because it destroys the separation a fiduciary is required to maintain. Once trust money and personal money are mixed, it becomes impossible to prove whose money is whose, and the client's funds are exposed to the broker's creditors and business risks. The consequence is serious: under the Texas Real Estate License Act, Texas Occupations Code §1101.652, commingling money that belongs to another person with the license holder's own money is an explicit ground on which TREC may suspend or revoke a license.

Related safeguards reinforce the separation. If a broker maintains a trust account, it must be clearly identified as a trust account. A broker may, but is not required to, maintain separate trust accounts for different clients or different types of trust money, such as earnest money deposits separated from property-management security deposits. And whether or not the broker delegates day-to-day bookkeeping, the broker remains responsible and accountable for the trust account and for the proper handling of every dollar of trust money received.

Interest, disputes, and accounting

If trust money is placed in an interest-bearing account, two rules apply. The money must remain available for disbursal at the appropriate time, and unless an agreement signed by the depositing party says otherwise, any interest earned is distributed to the parties who receive the money. The broker does not simply keep the interest.

When a transaction falls through, the broker cannot decide alone who gets the earnest money. TREC promulgated contracts let the broker require the buyer and seller to agree and sign a release before funds are disbursed; Rule 535.146(d) sets out the procedure for handling earnest money disputes. And a broker holding trust money must be able to account for it accurately and on request — accurate recordkeeping is part of the fiduciary duty, not an optional courtesy.

Common misconceptions

"A sales agent can hold earnest money in their own account for a few days." Wrong. A sales agent may never maintain a trust account. Trust money a sales agent receives goes immediately to the sponsoring broker.
"Earnest money can be deposited whenever is convenient." Wrong. Under Rule 535.146, a broker who accepts earnest money must deposit it in a trust account or deliver it to an authorized escrow agent by the close of business of the second working day after the date the broker receives the trust money, unless the principals agree otherwise in writing.
"A small amount of the broker's own money in the trust account is harmless." Wrong. Mixing the broker's funds with trust money is commingling and is prohibited regardless of the amount.
"The broker keeps any interest the trust account earns." Wrong. Unless a signed agreement provides otherwise, interest goes to the parties who receive the money, not to the broker.

Frequently asked questions

Can a sales agent maintain a trust account in Texas?: No. A sales agent shall not maintain a trust account. Any trust money a sales agent receives must be immediately delivered to the sponsoring broker, or handled exactly as the sponsoring broker directs.
How soon must a broker deposit earnest money?: Under Rule 535.146, a broker who accepts earnest money must deposit it in a trust account or deliver it to an authorized escrow agent by the close of business of the second working day after the date the broker receives the trust money, unless the principals agree to a different time in writing. This is the broker's handling deadline, separate from the buyer's deadline to deliver earnest money under a TREC contract.
What is commingling?: Commingling is mixing trust money with the broker's own funds — for example, combining the operating account and the trust account. It is prohibited because it breaks the required separation of client money from the broker's money.
What money counts as trust money?: A client's money, earnest money, rent, unearned fees, security deposits, or any money held on behalf of another person. The defining feature is that the money belongs to someone other than the broker.
Does a broker have to keep separate trust accounts for each client?: No. A broker may maintain separate trust accounts for different clients or types of trust money but is not required to. The broker remains responsible for the account either way.
Who gets the interest if trust money is in an interest-bearing account?: Unless an agreement signed by the depositing party says otherwise, the interest is distributed to the parties to whom the money is disbursed — not retained by the broker.

Bottom Line

Escrow and trust account questions reward a few precise facts. Trust money is other people's money, held by a broker in a fiduciary capacity in a clearly identified trust account or with an authorized escrow agent. A sales agent never holds it — it goes straight to the sponsoring broker. Under Rule 535.146, a broker who accepts earnest money must deposit it by the close of business of the second working day after the broker receives the trust money, unless the principals agree otherwise in writing — a broker-handling rule, separate from the buyer's contract deadline to deliver earnest money. And commingling — mixing trust money with the broker's own funds — is always prohibited. Lock in those points and this becomes a dependable topic. Keep building your command of the tested material with our Texas real estate exam blueprint.

Source: 22 Texas Administrative Code §535.146, Maintaining Trust Money, law.cornell.edu/regulations/texas/22-Tex-Admin-Code-SS-535-146; Texas Real Estate Commission, Frequently Asked Questions (earnest money and trust accounts), trec.texas.gov/public/frequently-asked-questions; Texas Occupations Code §1101.652, Grounds for Suspension or Revocation of License, statutes.capitol.texas.gov/Docs/OC/htm/OC.1101.htm.