PSI Virginia Real Estate Practice Exam

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What action is described as converting trust funds?

Utilizing clients' money for personal purposes
Depositing funds into a trust account
Withdrawing funds for repairs
Splitting funds among different accounts

The correct answer is: Utilizing clients' money for personal purposes

The action described as converting trust funds refers specifically to the misuse of clients' money by using it for personal purposes. When an agent or broker misappropriates funds that are supposed to be held in trust on behalf of clients, it constitutes conversion. This action breaches legal and ethical responsibilities and can lead to serious consequences, including disciplinary action, loss of license, and potential legal ramifications. The other options relate to the proper handling of trust funds. Depositing funds into a trust account is the appropriate action, as is withdrawing funds for specific, agreed-upon purposes, such as repairs when permitted. Splitting funds among different accounts could be acceptable under certain conditions but still needs to comply with regulations governing trust funds. These actions do not involve conversion, as they follow the rules for managing client funds rather than misusing them.