When rent and security deposits hit your business, you’re not holding “your” money—you’re holding client funds. Set up your banking wrong and you risk accidental commingling, audit trouble, and even uninsured deposits. Set it up right and you protect every owner and resident to the penny.
Here’s the Springfield-savvy playbook.
Why two trust accounts (minimum) are non-negotiable
1) Operating Trust (rents/owner funds).
2) Security-Deposit Trust (all resident deposits).
Keeping deposits out of the operating trust prevents “oops, we paid a vendor out of deposits” moments and satisfies Illinois broker escrow rules that prohibit commingling and require trust funds to sit in a federally insured depository. Legal Information InstituteIllinois General Assembly
Illinois’ real-estate rules are written for fiduciaries: escrow in an insured bank, no mixing with business funds (beyond a tiny buffer to avoid bank fees), and full records that tie balances to ledgers. Legal Information InstituteIllinois General AssemblyJustia Regulations
Local twist: statewide law sets interest/return duties for deposits (and Chicago’s RLTO adds strict “separate, interest-bearing, federally insured account” rules inside city limits). Springfield isn’t under the RLTO, but if you manage in Chicago, those rules apply. Illinois General AssemblydepositlawChicago
FDIC protection: it’s per owner/resident, not just per account
A properly titled trust/escrow account can qualify for FDIC “pass-through” insurance, which insures each underlying owner or resident up to $250,000 per bank, rather than capping coverage at the account’s total. Your bank records and your ledgers must clearly show who owns each dollar. FDIC+1FDIC+1
Example:
Security-deposit trust at Bank A totals $420,000 for 300 residents.
With proper titling/records, FDIC coverage “passes through” to each resident’s share (aggregate with that person’s other deposits at Bank A). The account isn’t limited to $250k total. FDIC
Same concept applies to owner funds inside the operating trust—each owner’s balance can enjoy pass-through coverage (again, aggregated with that owner’s other deposits at the same bank). FDIC
Key fine print: pass-through coverage requires correct fiduciary titling and accurate, up-to-date sub-ledgers identifying each beneficiary. No clean records = no pass-through. FDIC
How to structure your banking (simple, audit-proof setup)
Open two separate trust accounts at an FDIC-insured bank: “Broker Trust – Operating (Escrow)” and “Broker Trust – Security Deposits (Escrow).” Legal Information Institute
Title the accounts in fiduciary capacity (your bank can help) and keep beneficiary lists/ledgers current. FDIC
No commingling. Only client money in trust; at most, keep a small broker reserve to prevent bank fees, as permitted by rule. Illinois General Assembly
Three-way reconcile monthly (bank ↔ books ↔ sub-ledgers) and lock the period before owner draws. (Your software likely has a “three-way rec” workflow.) Justia Regulations
Mind local rules on deposits. Chicago = separate, insured, interest-bearing account + annual interest payment at the city-published rate; statewide interest duties may apply based on unit count. depositlawChicagoIllinois General Assembly
Why this matters (beyond compliance)
For owners: Clean segregation + pass-through FDIC coverage = safer funds and audit-ready transparency. Faster, accurate distributions follow naturally. FDIC
For residents: Deposits remain their property in a protected account, not a slush fund—critical if there’s ever a dispute or a landlord insolvency. (Chicago codifies this explicitly; it’s smart practice everywhere.) depositlaw
For your brand: Bank-grade protection and airtight reconciliations are trust signals you can market. They win listings and renewals.
Quick checklist: set it up (or clean it up)
☐ Two separate trust accounts at an FDIC-insured bank
☐ Fiduciary titling + written beneficiary records policy
☐ Zero commingling (tiny bank-fee buffer only)
☐ Monthly three-way reconciliation package on file
☐ City-specific deposit rules mapped (e.g., Chicago interest)
☐ Annual owner letter explaining your trust structure & FDIC pass-through
In Short
Trust accounts aren’t paperwork—they’re risk shields. Separate operating and deposit trusts prevent commingling, your reconciliations prove every dollar’s owner, and FDIC pass-through coverage protects clients per person, not per account. Do it right once, and you protect owners, residents, and your firm’s reputation for years.
