By Alex Morgan | April 10, 2026
If you collect rent or hold security deposits on behalf of someone else, you're probably required to hold those funds in a separate trust account. Here's the plain-English version.
What Trust Accounting Actually Means
Trust accounting is the practice of holding money that belongs to someone else — typically owners or tenants — in a separate, designated bank account, kept apart from your operating funds. The money in the trust account is never your money, even if it's sitting in a bank account in your name.
You probably need a trust account if you:
The exact rules vary by state. Real-estate licensing boards in most states regulate trust accounting for licensed property managers. Always check your state's specific rules — this article is general guidance, not state-specific legal advice.
Why It Matters
Three reasons trust accounting is non-negotiable:
1. State law usually requires it. Most states require licensed PMs to hold owner funds and tenant deposits in designated trust accounts, with specific rules about commingling, interest, and reconciliation.
2. Tenant security deposits are protected by law. If you commingle a tenant's deposit with your operating funds and your business has a bad month, you've effectively used the tenant's money. That's the kind of mistake that ends careers.
3. Owners deserve transparency. Owners trust you with their money. Holding it in a trust account, with monthly reconciliation, is the standard professional practice.