California Trust Fund Violations exam
2026 questions and rationales answers
1. What is a trust fund in California real estate practice?
A. Money belonging exclusively to the broker
B. Money or property received by a licensee on behalf of another person
C. Money earned as a commission
D. Money used for office expenses
Rationale: Trust funds are received or held by a licensee on behalf of others and create fiduciary
responsibilities.
2. Which California statute is the primary authority governing the handling of trust funds by
real estate brokers?
A. B&P Code §10131
B. B&P Code §10176
C. B&P Code §10145
D. B&P Code §10200
Rationale: Section 10145 establishes major requirements for receiving, depositing, and
disbursing trust funds.
3. A broker deposits a client's $20,000 purchase deposit into the broker's personal checking
account. This is generally:
A. Conversion only
B. Commingling
C. Legal if the money remains untouched
D. An ordinary business expense
Rationale: Client trust funds must be kept separate from the broker's personal or business funds.
4. What is commingling?
A. Depositing commission into an escrow account
B. Mixing trust funds with the broker's own funds
C. Transferring funds between two trust accounts
D. Returning a deposit to a buyer
,Rationale: Commingling occurs when money belonging to others is mixed with the broker's
personal or business money.
5. Which is an example of trust fund conversion?
A. Properly depositing a buyer's deposit into escrow
B. Returning excess funds to a client
C. Using a client's trust money for the broker's personal expenses
D. Reconciling a trust account
Rationale: Conversion involves unauthorized use or misappropriation of money belonging to
another.
6. Under California law, trust funds generally must be deposited into an appropriate location
no later than:
A. The same calendar month
B. 10 business days after receipt
C. Three business days after receipt
D. 30 calendar days after receipt
Rationale: B&P Code §10145 and Regulation 2832 generally require proper placement within
three business days, subject to specific rules and exceptions.
7. Trust funds may generally be placed:
A. Only in the broker's personal account
B. Only in cash
C. With the owner, in a neutral escrow depository, or in a properly designated trust account,
as permitted by law
D. In any account chosen by the salesperson
Rationale: California law specifies the permissible destinations for trust funds.
8. A broker receives a buyer's check payable to an escrow company. The broker should:
A. Deposit it into the broker's operating account
B. Hold it indefinitely
C. Handle it according to the applicable trust-fund and escrow requirements
D. Cash it personally
Rationale: A purchase deposit is generally a trust fund and must be handled according to
California requirements.
9. Which regulation addresses maintaining columnar records of trust funds received?
, A. Regulation 2725
B. Regulation 2834
C. Regulation 2831
D. Regulation 2750
Rationale: Regulation 2831 addresses required trust-fund records.
10. Regulation 2831.1 primarily concerns:
A. Advertising
B. Continuing education
C. Separate records for each beneficiary
D. Property inspections
Rationale: Beneficiary records allow the broker to account for funds belonging to each individual
beneficiary.
11. Why must a broker maintain a separate beneficiary record?
A. To calculate commissions
B. To identify the amount held for each beneficiary
C. To determine property taxes
D. To calculate depreciation
Rationale: Beneficiary records provide an accounting of funds held for each person.
12. A trust account contains $50,000 belonging to several clients. The broker's own money is
also deposited into the account. This is:
A. Conversion automatically
B. Commingling
C. Escrow
D. Proration
Rationale: The broker generally may not mix personal or business funds with trust funds.
13. A broker maintains $500 of personal money in a trust account solely to cover bank
charges. Which statement is most accurate?
A. Any amount is always permitted
B. The broker must comply with California's specific limit and trust-account rules
C. Personal money must equal the amount of trust funds
D. The broker may use the money for personal expenses
2026 questions and rationales answers
1. What is a trust fund in California real estate practice?
A. Money belonging exclusively to the broker
B. Money or property received by a licensee on behalf of another person
C. Money earned as a commission
D. Money used for office expenses
Rationale: Trust funds are received or held by a licensee on behalf of others and create fiduciary
responsibilities.
2. Which California statute is the primary authority governing the handling of trust funds by
real estate brokers?
A. B&P Code §10131
B. B&P Code §10176
C. B&P Code §10145
D. B&P Code §10200
Rationale: Section 10145 establishes major requirements for receiving, depositing, and
disbursing trust funds.
3. A broker deposits a client's $20,000 purchase deposit into the broker's personal checking
account. This is generally:
A. Conversion only
B. Commingling
C. Legal if the money remains untouched
D. An ordinary business expense
Rationale: Client trust funds must be kept separate from the broker's personal or business funds.
4. What is commingling?
A. Depositing commission into an escrow account
B. Mixing trust funds with the broker's own funds
C. Transferring funds between two trust accounts
D. Returning a deposit to a buyer
,Rationale: Commingling occurs when money belonging to others is mixed with the broker's
personal or business money.
5. Which is an example of trust fund conversion?
A. Properly depositing a buyer's deposit into escrow
B. Returning excess funds to a client
C. Using a client's trust money for the broker's personal expenses
D. Reconciling a trust account
Rationale: Conversion involves unauthorized use or misappropriation of money belonging to
another.
6. Under California law, trust funds generally must be deposited into an appropriate location
no later than:
A. The same calendar month
B. 10 business days after receipt
C. Three business days after receipt
D. 30 calendar days after receipt
Rationale: B&P Code §10145 and Regulation 2832 generally require proper placement within
three business days, subject to specific rules and exceptions.
7. Trust funds may generally be placed:
A. Only in the broker's personal account
B. Only in cash
C. With the owner, in a neutral escrow depository, or in a properly designated trust account,
as permitted by law
D. In any account chosen by the salesperson
Rationale: California law specifies the permissible destinations for trust funds.
8. A broker receives a buyer's check payable to an escrow company. The broker should:
A. Deposit it into the broker's operating account
B. Hold it indefinitely
C. Handle it according to the applicable trust-fund and escrow requirements
D. Cash it personally
Rationale: A purchase deposit is generally a trust fund and must be handled according to
California requirements.
9. Which regulation addresses maintaining columnar records of trust funds received?
, A. Regulation 2725
B. Regulation 2834
C. Regulation 2831
D. Regulation 2750
Rationale: Regulation 2831 addresses required trust-fund records.
10. Regulation 2831.1 primarily concerns:
A. Advertising
B. Continuing education
C. Separate records for each beneficiary
D. Property inspections
Rationale: Beneficiary records allow the broker to account for funds belonging to each individual
beneficiary.
11. Why must a broker maintain a separate beneficiary record?
A. To calculate commissions
B. To identify the amount held for each beneficiary
C. To determine property taxes
D. To calculate depreciation
Rationale: Beneficiary records provide an accounting of funds held for each person.
12. A trust account contains $50,000 belonging to several clients. The broker's own money is
also deposited into the account. This is:
A. Conversion automatically
B. Commingling
C. Escrow
D. Proration
Rationale: The broker generally may not mix personal or business funds with trust funds.
13. A broker maintains $500 of personal money in a trust account solely to cover bank
charges. Which statement is most accurate?
A. Any amount is always permitted
B. The broker must comply with California's specific limit and trust-account rules
C. Personal money must equal the amount of trust funds
D. The broker may use the money for personal expenses
