When would a title company typically require a separate trust account?

A title company typically requires a separate trust account when handling a buyer’s earnest money deposit because this type of account is designed to hold funds that belong to clients in a fiduciary capacity. This ensures that the buyer's money is kept separate from the title company's operational funds, providing protection for the buyer and ensuring compliance with legal and regulatory requirements.

Using a trust account for earnest money deposits guarantees that these funds are safeguarded until the terms of the real estate transaction are fulfilled, such as closing the sale. This practice helps maintain transparency and accountability, as the title company has a responsibility to manage these funds ethically on behalf of the buyer.

While daily business transactions, loan disbursements, and employee payroll may involve handling funds, they do not necessitate the same level of safeguarding and fiduciary responsibility as the earnest money deposit, which is specifically held in trust for the benefit of another party.