Yes, a revocable trust absolutely can, and often should, own a checking account, and this is a foundational element of effective estate planning for many San Diego residents.
What are the benefits of a trust-owned bank account?
Establishing a bank account specifically in the name of the trust, rather than the individual grantor, provides several key advantages. Firstly, it maintains a clear separation of assets between the individual and the trust, crucial for probate avoidance. According to a recent study by WealthManagement.com, approximately 60% of Americans do not have a will or trust, leaving their assets subject to potentially lengthy and expensive probate proceedings. A trust-owned account allows for seamless management of funds for the benefit of the grantor during their lifetime, and then a smooth transition to beneficiaries upon their passing. Furthermore, it demonstrates to financial institutions that the trust is actively managed, avoiding potential scrutiny or account restrictions. It also facilitates easy tracking of trust income and expenses for tax purposes. Think of it like this: the trust is a legal entity, and like any entity, it needs a place to deposit and manage its funds.
How do I open a bank account for my revocable trust?
Opening a trust bank account isn’t drastically different from opening a personal account, but requires a bit more documentation. You’ll generally need a copy of the complete trust document, a certified copy of the grantor’s driver’s license or other government-issued ID, and the bank’s specific trust account application. The bank will likely require you to list the trustee(s) who are authorized to transact on the account, and may require a Taxpayer Identification Number (TIN) for the trust – this is usually the Social Security Number of the original grantor, or if the trust is irrevocable, an Employer Identification Number (EIN) obtained from the IRS. It’s important to ensure the account is titled correctly: “The [Trust Name], [Trustee Name], Trustee.” Failure to do so can create complications with asset transfer and probate avoidance. We often advise our clients to work directly with a banking professional familiar with trust accounts to ensure everything is set up correctly.
What happened when a client didn’t title the account correctly?
I remember a client, let’s call her Eleanor, who established a revocable trust but inadvertently titled the trust’s checking account solely in her name. After she passed away, her family attempted to access the funds, but the bank, rightfully so, required probate. The reason? The account was not clearly owned by the trust, and therefore, subject to the usual estate settlement procedures. This resulted in significant legal fees, delays in accessing funds for her grieving family, and a frustrating situation that could have been easily avoided. Eleanor’s estate faced over $5,000 in probate costs and a six-month delay in distributing the assets. It was a painful lesson learned, and it underscored the importance of meticulous attention to detail when establishing and maintaining trust-owned accounts. It’s a mistake we see far too often.
How did a properly funded trust account save another client’s family time and money?
On the other hand, I had a client, Robert, who diligently followed our advice and established a trust-owned checking account and funded it accordingly. When he passed away unexpectedly, his family was able to seamlessly access the funds to cover funeral expenses and ongoing bills. Because the account was properly titled and the trust was well-funded, the assets bypassed probate entirely. The family avoided the substantial costs and delays associated with probate, and they were able to focus on grieving and supporting each other. They estimated they saved over $10,000 in probate fees and months of administrative burden. Robert’s foresight and proactive planning provided his family with both financial security and peace of mind during a difficult time. It was incredibly rewarding to see the positive impact of proper estate planning.
In conclusion, a revocable trust can and should own a checking account to facilitate efficient asset management and seamless transfer of wealth, but it’s crucial to do it correctly. San Diego residents should always consult with an experienced estate planning attorney to ensure their trust is properly established and funded, and that all accounts are titled correctly to avoid potential complications.
Who Is Ted Cook at Point Loma Estate Planning Law, APC.:
Point Loma Estate Planning Law, APC.2305 Historic Decatur Rd Suite 100, San Diego CA. 92106
(619) 550-7437
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