Living Trusts and Bank Accounts

By Christine Funk, J.D.

Living Trusts and Bank Accounts

By Christine Funk, J.D.

A living trust is a means of passing on your property to your heirs without having to go through probate, or the court process of proving a will and settling an estate. Placing a bank account in a trust is an effective way to pass your financial assets to your heirs without the added costs and time associated with court processes.

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Benefits of a Living Trust

There are many benefits of a living trust, including the following:

  • There is little to no delay between the time of your passing and the time your heirs receive the money and property you leave them. The probate process takes anywhere from several months to several years to complete.
  • The value of your estate, your identified heirs, the amount of money you leave behind, and the property you leave behind remains private. The probate process, on the other hand, is public.
  • In the event you become incapacitated, either physically or mentally, your designated trustee may take over and manage your financial affairs until you return to wellness. Probate only begins after you pass away. Thus, if you don't have your bank accounts in a living trust, it may take weeks or months, along with a court order, for someone else to be able to handle your financial affairs.

Creating and Funding a Living Trust

To include your bank account in your living trust, you must first create the trust. This can be done with the help of an attorney or other legal expert in estate planning.

Next, for the terms of the trust to take effect, you must "fund" it, meaning you must transfer your assets into the trust. To do this, you must change the title to the property from your name individually to the name of the trust. Most people name their trust something along the lines of "The Olson Living Trust." Thus, when they convert their assets, they change titles from "Jenny Olson" to "Jenny Olson, Trustee for the Olson Living Trust."

Changing the Name on Your Bank Accounts

In order to make certain your bank accounts are part of the living trust, you must change the names on the accounts as well. In most circumstances, banks require a certain amount of paperwork before they permit a name change.

In addition to completing whatever forms the bank uses to facilitate such a change, you also need proof of the trust itself. This may mean providing the bank with a copy of the trust document. Alternatively, you may be able to provide the bank with a certificate of trust, which certifies that you do, indeed, have a living trust. The advantage of the certificate is that it does not include the personal details of the trust document.

Living trusts are a common means of estate planning and are helpful for passing assets, such as bank accounts, to your heirs with minimal cost and delay. If you are considering creating a trust for these purposes, you may want to consult with an estate planning attorney for assistance.

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