Funding Bank Accounts

In a previous article, we delved into the crucial subject of trust funding – a process where you transfer ownership of your assets into a trust. When done correctly, trust funding can help avoid probate (the court-supervised process of administering a deceased person’s estate) and ensures a safe and efficient management of your assets in case of mental incapacity. This time, we’re going to focus on one specific type of asset – bank accounts.

Easy Steps, Potential Challenges

Transferring bank accounts into a trust can be one of the simplest tasks in trust funding, but it also can lead to a few hurdles. The process typically involves visiting the relevant bank, providing a copy of your trust (or certification of trust), and completing the bank-specific change paperwork.

Ownership of bank accounts is reflected on a document called a “signature card.” Therefore, moving your bank account into trust should involve updating the signature card with the Trustee’s signature (e.g., change signature card from John Smith to John Smith, Trustee). Some banks make this process straightforward, while others add a few complications.

Coping with Additional Bank Requirements

Certain banks might require closing the existing account and reopening it as a new one in the trust’s name. This could mean getting new checks issued, resetting online bill pay accounts, and changing any automated deposits and withdrawals.

Additionally, some banks might limit certain benefits usually provided to individual account holders, such as free checking or ATM fee reimbursement. This limitation stems from internal policies concerning different types of account holders.

In some extreme cases, a few banks or credit unions might not allow trust accounts at all. If you encounter such resistance, it could be indicative of future challenges for successor trustees and beneficiaries. In such a scenario, switching to a more cooperative bank may be a practical solution.

Understanding Trust Bank Accounts and Tax Regulations

Under Treasury Regulation 1.671-4, if your trust is revocable and you (the trust maker) are at least one of the trustees, and not disabled, you don’t need to get a separate tax identification number to open a trust bank account. Instead, you can continue to use your Taxpayer Identification Number (which for most individuals is their Social Security Number) to open accounts in the name of the trust. Keep this in mind when dealing with bank officers who may not be familiar with this regulation.

Prepare for the Future with Brady Cobin Law Group, PLLC

In the midst of ever-changing times and economic shifts, preparing for the future is a necessity. Planning for retirement might seem a long way off, but it’s never too early to start. At Brady Cobin Law Group, PLLC, we’re here to help you make the most of your financial resources and devise a comprehensive estate plan that ensures the safety of your assets.

Ready to embark on your estate planning journey? Call us at (919) 782-3500 or contact us online to schedule your free initial consultation with an experienced estate planning attorney in Raleigh, NC.

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