Can a Revocable Trust Be the Beneficiary of a Personal Bank Account?

By Michelle Kaminsky, J.D.

Can a Revocable Trust Be the Beneficiary of a Personal Bank Account?

By Michelle Kaminsky, J.D.

Naming a beneficiary on your personal bank account is a great way to avoid probate. Payable-on-Death (POD) accounts allow you as the holder to name a beneficiary to receive the assets in the account at your death. One type of POD is a personal bank account—including checking, savings, money market, and certificates of deposit—and you may name either an individual or individuals, or a revocable trust, as your beneficiary.

A revocable trust, also called a living trust, is a legal document that places your assets into a trust during your lifetime and distributes them to your chosen beneficiaries after your death. If you name a revocable trust as the beneficiary of your personal bank account, you are also the grantor, or creator, of that trust, which means you have full power to revoke or change it while you're still alive. Named beneficiaries of personal bank accounts do not have access or rights to assets in the account until after the account owner has passed away.

Read on to find out whether you should name a revocable trust as your beneficiary on your personal bank account.

Revocable Trust vs. Individual as Beneficiary

Whether you name a revocable trust or an individual as the beneficiary on your personal bank account, that beneficiary avoids the probate process. In the simplest terms, the assets from the account pass directly to your named beneficiary without having to go through the legal process of distributing a deceased person's estate, which can be costly and take months, if not years, to settle.

Note that if you name a beneficiary on your personal bank account, this designation overrides anything you may have written in your will concerning who should receive those assets upon your death. As a side note, then, you should always make sure your estate planning documents work together and cover all of your assets in the way you desire—and be sure to check periodically, ideally once a year, that they remain an accurate reflection of your wishes.

Beneficiary vs. Retitling

You may also consider retitling your personal account in the name of the revocable trust so that the trustee has immediate and direct control over the account's assets. You can name yourself as the trustee, which would then give you the authority to handle the trust's assets in accordance with the trust documents. As the trust's grantor, you would also still have the power to revoke or change the trust or its terms—including its named beneficiaries—as you like.

Moreover, note that if you retitle your bank account to a revocable trust, you can name a secondary beneficiary should the primary beneficiary predecease you. You can also name contingent beneficiaries in the revocable trust itself. With a normal POD account, you can only name one beneficiary, which means if your primary beneficiary has predeceased you, the account would fall into your estate and enter the probate process.

Alternative to Naming a Beneficiary

One common alternative to naming a beneficiary on an account is to change the title holder on the account to include the intended beneficiary. For example, if you want your son to inherit the assets in your personal bank account, you can name him as a co-owner during your lifetime. Upon your death, your son would have immediate access to the funds in the account.

That said, your son would also have full access to the account while you are still alive. If that would be a concerning prospect in your situation, you might consider naming a revocable trust with your son as the beneficiary of that trust.

Deciding on the best way to transfer assets from your personal bank account to beneficiaries requires that you consider many factors, including potential tax and fee consequences. Accordingly, your best bet is to seek the advice of an experienced estate planner who can guide you on the most advantageous path to transferring your wealth to where you want it to go after you're gone.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.

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