Every state has its own laws pertaining to trusts and in every state there are many different types of trusts that you can establish. However, the person who creates the trust, known as the grantor, and the person who operates the trust, known as the trustee, are not always one and the same. The trustee must open and operate accounts on behalf of the trust. You may consider including a successor trustee in your trust as that person has a legal right to assume control of the day-to-day operations of the trust if the original trustee can no longer carry out those duties.
Write a trust document. You do not have to hire a trust attorney to write a trust document on your behalf but people typically involve a lawyer in the process in order to ensure that the trust complies with state law. Decide who to name as the trust's beneficiaries and who to name as the trustee although you can name yourself as the trustee if you establish a revocable trust.
Go to the bank. Provide the new account sales representative with a complete copy of the trust document and make arrangements to return to the bank once the representative has received approval from the bank's legal department to open the trust. The bank's legal department can refuse to open a trust if any section of the trust document deviates from state law.
Return to the bank and provide the bank with the Tax Identification Number for the trust, which doubles as your Social Security Number if you are the grantor of a revocable living trust. If you are the trustee, you must also provide the bank with at least one form of government issued identification as well as your physical address, Social Security number and date of birth. Decide what kind of account you wish to open but take into account that trust accounts are non-personal accounts so you normally have to choose from the bank's business account options rather than from the personal account options.
Make your initial deposit by writing a check made payable to the trust and handing it to the new account representative. Sign the account signature cards as the authorized signer or trustee. Take your receipt and leave the bank.
Tips
The Federal Reserve enables you to create a revocable trust bank account without having to first establish a legal trust. You can simply add the names of people to your account as pay-on-death beneficiaries and when you die, the money inside the account passes to the beneficiaries without going through probate. You cannot create other types of trust accounts by naming POD beneficiaries though and the federal reserve only allows you to do this for a revocable trust because you and your trust operate under the same TIN.
Warnings
If you establish an irrevocable trust, your trustee must operate the trust in a manner that complies with the instructions laid out in the trust document. However, once you create the trust, you relinquish control of the assets that are held by the trust. You benefit from creating an irrevocable trust because you and the trust are separate entities for tax purposes. However, aside from not being able to access the money in the trust account, you cannot make any changes to the trust or abolish it once it has come into effect.
References
- State Bar of California: Do I Need a Living Trust?
- Federal Deposit Insurance Corporation: Ownership Categories Revocable Trust Accounts
- Fidelity Investments. "What Is a Trust?" Accessed March 6, 2020.
- American Bar Association. "Revocable Trusts." Accessed March 6, 2020.
- HG.org Legal Resources. "When to Consider an Institutional Trustee." Accessed March 7, 2020.
- AARP. "Choose the Right Executor or Trustee." Accessed March 6, 2020.
- American Bar Association. "Choosing the Executor or Trustee." Pages 10-11. Accessed March 6, 2020.