New York Construction Trust Funds: Segregation and Control
New York contractors must keep project trust funds identifiable and properly documented. Dedicated Buildplus project accounts make that discipline easier.
This article provides general information, not legal advice. New York trust- fund obligations depend on the project, contracts, payments, and parties involved. Consult qualified New York counsel about your circumstances.
One project's owner should not unknowingly finance another project's shortfall. A subcontractor should not go unpaid because yesterday's project consumed today's draw. And a large project balance should never be mistaken for the contractor's vacation fund.
Article 3-A of New York's Lien Law is designed to prevent exactly that kind of diversion. Funds received under or in connection with each construction contract generally become assets of a separate trust. The contractor is the trustee; receiving the money does not turn it into ordinary working capital.
Those assets must be applied to permitted project costs, including claims from subcontractors, laborers, architects, engineers, surveyors, and material suppliers, along with specified taxes, benefits, insurance, and bond premiums. Using trust assets for another purpose before the trust claims are paid or discharged may constitute a diversion.
That is an accounting responsibility as much as a legal one. Building projects and administering fiduciary funds require different skills. A GC managing several jobs needs a simple way to keep each trust's cash, obligations, and transactions identifiable without surrendering control of routine payments.
Does New York require a separate bank account?
Not always—but pooled banking comes with a demanding condition. Lien Law §75 expressly permits a trustee to hold funds from separate trusts in the same bank account if its books clearly allocate deposits and withdrawals to each trust.
But that permission is not a shortcut. The trustee must maintain books for each trust—receivables, payables, funds received, payments made, the parties involved, dates, amounts, and enough detail to connect each transaction to a trust purpose.
In practice, the question is not simply whether money shares a bank account. It is whether the contractor can identify each trust's cash and prove where it went. A dedicated account for each project is the simplest starting point. It does not replace the required books, but it eliminates the need to untangle multiple projects before the accounting work can even begin.
Records are not an after-the-fact exercise
New York requires more than a bank statement, and the penalty for thin books is unusual: failure to keep the records §75 specifies can become presumptive evidence that trust funds were diverted. In effect, the gap in the books testifies against the trustee.
That standard becomes painful to reconstruct. A two-year project can generate hundreds—or, on some Buildplus projects, more than 1,000—transactions. Waiting until a beneficiary asks questions can mean trying to rebuild years of project history from bank statements, contracts, invoices, email, and memory. The safer practice is to connect the financial record to the project as work happens.
How Buildplus supports segregation and recordkeeping
Buildplus combines separate cash with project-level accounting. Each project gets a dedicated bank account, and the company gets a separate operating account. The accounts are opened in the contractor's business name, so the GC retains control without placing an outside fund-control company between the project and routine payments.
That structure supports Article 3-A discipline in four practical ways:
- Project funds stay identifiable. Receipts land in the account assigned to that project instead of disappearing into a pooled operating balance.
- Project obligations stay visible. Budgets, subcontracts, invoices, expenses, and payments live in one project record.
- Payments carry their context. Money sent from the project account is recorded in the project ledger, while transactions from connected cards and outside bank accounts can be classified to the correct job.
- Company cash stays distinct. A separate operating account gives the contractor's earned business money a destination outside the project balance.
Although §75 may allow pooled banking with sufficiently detailed books, dedicated project accounts reduce the allocation burden and the risk of one project quietly funding another. Buildplus then ties banking activity to the budget, contracts, bills, invoices, and project ledger that explain it. The account structure and project record work together to turn legal allocation into visible daily practice.
What is Buildplus?
Buildplus is the payments, expenses and invoicing platform built for contractors running cost-plus jobs. Every payment, swipe and reimbursable expense stays tied to the project it belongs to.
Make the record before anyone needs it
The contractor who can produce a clean project account and a contemporaneous ledger is in a better position than one trying to reconstruct a pooled account after a dispute begins. That record protects trust beneficiaries, but it also helps the GC demonstrate that proper payments were made and legitimate project costs were handled correctly.
Buildplus does not decide whether a receipt is a trust asset or whether a payment is legally permitted. It also does not replace every contract, address, or supporting record required by law. The contractor remains the trustee and must classify transactions correctly, preserve complete documentation, and use funds only for lawful trust purposes.
Software cannot take over the trustee's legal judgment. It can make sound fund administration much easier to run. Buildplus gives a New York GC separate project accounts, project-linked records, and a reviewable transaction history; the contractor and counsel remain responsible for confirming that the complete §75 record and every use of trust assets satisfy the law.