A trust is a valuable estate planning tool that offers flexibility and control over the distribution of your assets.  One essential aspect of managing a trust is opening a bank account in its name.  This article will explore the key factors to consider when opening a trust bank account, including the required documentation, account types, and potential tax implications.

Required Documentation

When opening a bank account for a trust, financial institutions require specific documents to verify the trust’s existence and confirm the identity of the trustee(s).  These documents typically include:

  • Certificate of trust: Also known as a trust abstract, this document is a highly condensed version of the trust agreement.  It includes the trust’s essential details, including the names of the grantor, trustee, and beneficiaries, without revealing sensitive information about the beneficiaries or assets.  We recommend that you start by providing only this document, which will be accepted as sufficient by most financial institutions.
  • Affidavit of trust: This document is very similar to the certificate of trust, but is a longer, more complete summary of the trust.  If the bank will not accept the certificate of trust, the affidavit of trust should be provided.
  • The trust agreement itself: We strongly recommend that you not provide the entire trust to the financial institution.  The certificate or affidavit of trust each contain all of the information that should be needed, and there is really no good reason for the bank to see every single provision of your entire trust.  If the financial institution insists, you have to decide if you want to reveal the entire trust, or if you should perhaps consider using a different bank.
  • Tax Identification Number (TIN): A trust requires its own TIN, which can be obtained from the IRS.
  • Identification of the trustee(s): Banks will request personal identification, such as a driver’s license or passport, to confirm the trustee’s identity.

Types of Trust Accounts

There are various types of trust accounts, depending on the trust’s purpose and structure.  Common trust account types include:

  • Revocable trust accounts: These accounts are associated with revocable living trusts, allowing the grantor to retain control over the trust assets and make changes to the trust during their lifetime.
  • Irrevocable trust accounts: These accounts are linked to irrevocable trusts, where the grantor relinquishes control over the trust assets and cannot make changes to the trust.
  • Testamentary trust accounts: These accounts are created after the grantor’s death according to the terms of their will.

Choose the account type that best aligns with your trust’s purpose and structure.

Co-Trustees and Authorized Signers

If your trust has co-trustees, the bank may require all co-trustees to be present when opening the account.  Additionally, banks may ask for a resolution or agreement, signed by all co-trustees, outlining the trust’s banking authority and authorized signers.

Tax Implications

Trusts are subject to specific tax rules, and the trust bank account may generate interest or other income.  Consult with a tax professional to understand your trust’s tax obligations and ensure proper tax reporting.

Ongoing Account Maintenance

Once the trust bank account is open, the trustee(s) must maintain accurate records and provide regular account statements to the beneficiaries or other required parties.  This transparency helps ensure proper trust administration and compliance with the trust’s terms.

Conclusion

Opening a bank account in the name of a trust is a crucial step in administering and managing the trust’s assets.  Understanding the required documentation, account types, and potential tax implications will help you navigate the process efficiently.  If you have additional questions, our Phoenix, Arizona trust attorneys are here to help ensure your trust bank account complies with all legal and tax requirements.  Simply contact our office at (602) 274-4400 to schedule an appointment.