A revocable living trust checking account is a standard demand deposit checking account that is an asset of a revocable living trust. While the revocable living trust checking account is set up just like any normal checking account, there are restrictions on how the funds can be used and who has the authority to withdraw or add funds to the account.
Revocable Living Trusts
A trust is simply an entity that holds assets for the benefit of the individuals named in the trust agreement. This agreement is a legal document that specifically dictates the trust terms and what can and cannot be done with the trust's assets. A revocable living trust is established while the donor (also known as the grantor) of the trust is still alive. The trust agreement names an individual or corporation (such as a bank) to serve as either trustee or co-trustees. A trustee denotes a single party, whether an individual or corporation, and co-trustees stands for more than one trustee.
How Assets Are Titled
All assets placed in trust are titled in the name of the trust and will have the same tax identification number, as a trust is a taxpayer in its own right. In the case of a revocable living trust checking account for John Doe, the account would be titled "The John Doe Revocable Trust Under Agreement Dated January 1, 2001, John Doe and Susie Doe as Co-Trustees." Checks issued for the funds placed in the revocable living trust checking account would have the same title on them, and only the trustee or co-trustees would have the authority to sign checks on the account. Any other named beneficiaries of the trust would not have withdrawal rights over these funds.
Note of Caution
Many retail banks have fine print in their checking account opening documents stating that if there is more than one signatory on the account, that the bank may act on the orders of either party. While attempts can be made to note that more than one trustee signature must be obtained, it is very difficult to enforce. Corporate trustees are recommended as opposed to individuals to serve as trustee or co-trustee for many reasons, and this is one of them. Trust assets held on a trust platform with a bank or corporation that has trust powers are held separately and do not face the problem noted above.
Setting Up a Revocable Trust Checking Account
A checking account for a revocable trust can be established only by the trustee or co-trustees that have been appointed and accepted to serve in a trustee capacity by the trust agreement. In order to set up a revocable living trust checking account, the trustee or co-trustees must go in person to a bank branch together to sign the necessary documents to open the account. The trustees will need to bring with them at a minimum, a copy of the trust agreement, personal identification for each trustee, such as a driver's license, and if possible, IRS form SS4. IRS form SS4 is the document that is received from the IRS when a tax identification number for the trust is assigned. Trustees should contact the bank branch before arriving in person to ensure that they have all account opening documents that the bank will require.
Seek Legal Advice
A trust is a complicated legal document, and it is always a good idea to seek the advice of a trust and estates lawyer before taking any action with regard to trusts. Tax and administration issues change constantly as the law changes.
Mary Frazier began writing in 2011 for various websites and has over 20 years of experience as a bank vice president and senior trust officer. Frazier is a Certified Trust and Financial Advisor, holds a Bachelor of Arts in economics from the University of North Florida and holds a Master of Science in finance from the College for Financial Planning.