Trust FundsIntermediateCalifornia Exam

A broker's trust fund records must be retained for how long after the transaction closes or the funds are disbursed?

A1 year

B3 yearsCorrect

C5 years

D7 years

Why 3 years Is Correct

Answer B: 3 years

California BPC §10148 requires brokers to retain all trust fund records, documents, and files for three years from the date of closing or the date the transaction was cancelled — available for DRE inspection.

Exam Tip: Trust Funds

Trust fund questions test the rules for handling client money. Know the deadlines for depositing trust funds, what constitutes commingling vs. conversion, and the penalties for violations.

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Key Terms to Know

Escrow

A neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.

Deed of Trust

A security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.

Closing Costs

Fees and expenses paid by the buyer and/or seller at the closing of a real estate transaction, in addition to the property's purchase price.

Proration

The division of ongoing property expenses (taxes, HOA dues, rents) between buyer and seller at closing based on their respective days of ownership.