HOW TO TRANSFER BANK ACCOUNTS INTO
YOUR LIVING TRUST
By: David L. Crockett, Attorney, CPA
UCLA Law School , J.D. ’69, UC Berkeley ’66
901 Dove St., Ste 120, Newport Beach, CA 92660
CONCEPT-TRUST IS LEGALLY RECOGNIZED UNDER STATE LAW.
Your liv-ing trust is a legal entity recognized by state law and having it in place keeps your estate from having to go through the probate court system. Staying out of probate avoids costly mandatory probate fees and makes transfers after the death of a Trustor a lot easier and faster. (Probate typically takes a year before the estate can be distributed). However, the trust only controls what you actually place and transfer into the trust. So the signing of the declaration of trust document is only the first stage in getting assets into your trust. The second stage requires that you actually go to the banks and securities companies where your accounts are held which you want to put in the trust and instruct them to change the accounts into your trust.
REVOCABLE TRUST IS NOT RECOGNIZED BY THE IRS AS SEPARATE.
While the Trustors are alive and the trust is “revocable” (i.e. changeable/amendable), the trust is not considered a separate legal entity by the IRS and the CA Franchise Tax board and the trust tax ID# is the social security number of the Trustor. While the Trustors are alive the income and expenses of the trust are reported on the personal income tax returns of the Trustors, forms 1040 and 540. The banks and securities companies holding revocable trust accounts issue the year-end form 1099’s under the social security numbers of the Trustors. Thus, while the Trustors are alive, the trust DOES NOT have its own federal tax ID#.
STEPS REQUIRED TO CHANGE ACCOUNTS INTO YOUR TRUST.
Because of the trust going from revocable to permanent, the successor Trustee as part of normal trust administration will have to change the names and tax ID numbers on all the Trust bank and securities accounts. Here are the steps:
(1) The trustees of the trust need to go to the banks and securities institutions to have the accounts changed. These documents need to be provided: a copy of the trust; and certification of trust.
(2) The banks and securities companies may have their own forms that they need done as well.
(3) A checking account and linked savings account should be set up. Depending upon how the bank or securities account does it, they may just keep the same accounts the Trustors already have but just change the account titles and the names on the checks. Others may want to open new accounts. What is important is the naming on the account statements and checks.
(4) The account signers must ONLY be the Trustee or Trustees stated in the Trust. If there are co-trustees, then each co-trustee must be an account signer which would typically be where there is a husband-wife trust.
(5) If the bank asks for a death beneficiary designation for the account tell them that the trust is the death beneficiary.
(6) The name on the account is what prints out on the bank statements and checks. The name you set up with the banks must contain the name of the trust AND the name of the successor trustee. The certification of trust will have appropriate wording for the account name. A typical account name looks like this:
“Jane Doe, Trustee of the Jane Doe Trust dated 1/1/15”
(7) If this is a husband-wife trust where both are the Trustees, then the wording for the account name would be:
“ Jane Doe and John Doe,
Trustees of the Jane and John Doe Revocable Trust dated 1/1/15”
(8) Accounts outside of trust in some situations. Bear in mind that the trust ONLY controls banks and securities accounts which are in the name of the trust. For practical reasons and confidentiality reasons, some people prefer to have some bank ac-counts which are not in the trust. As an example, a husband and wife could have a joint checking account that is payable on death to the survivor with smaller sums of money (suggest $5,000 to $10,000) so that when one dies there is money readily available to pay bills and expenses. Another example would be where an elderly mother (whose husband is already deceased) sets up an account outside her trust which is joint with her daughter because the daughter is not a trustee on the mother’s trust. With such an account, the daughter would have access to funds immediately after the mother’s passing without having to go through procedures to get herself established as a successor trustee and signer on the mom’s trust bank accounts.