Understanding Trust Accounts
A trust account is a special type of account that holds funds specifically identified in a trust document for a specific beneficiary or group of beneficiaries. Typically, in Florida funds held in trust accounts may only be accessed by individuals named in the trust and may only be used for purposes specified in accordance with the trust document itself. Establishing a trust agreement and opening an associated account can be complicated in Florida and may require the services of a financial or legal professional.
Opening a Trust Account in the State of Florida
In order to open a trust account, a valid Florida trust agreement must be effectuated. Therefore, the main steps to creating a functioning trust account in Florida are as follows:
First and foremost, a grantor must create a trust document that accomplishes their particular objectives. This is done by soliciting the aid of a Florida estate planning attorney to draft the trust document and assist in facilitating its execution in accordance with Florida laws. Trusts agreements may be either testamentary (taking effect after the death of the grantor) or inter vivos (taking effect during the life of the grantor; also known as, a living trust). Testamentary trusts, which are usually contained in a grantor’s will, provide for assets to be transferred into a trust account through the probate process. Conversely, inter vivos trusts provide for assets to be transferred into a trust account at the time the trust is established.
Thereafter, the grantor must select beneficiaries to receive the assets in accordance with the specific terms of the trust document.
Next, a trustee or group of trustees must be assigned to oversee the trust and its account. The trustee(s) must be very trustworthy and able to follow through on the grantor’s wishes. A grantor may also serve as a trustee but must choose an alternate trustee in the event of death or incapacity. It is also important that the trust document specifically delineates the trustee’s powers over the funds in the account or other assets held by the trust. For example, does the trust allow the trustee to control the use of or invest the funds?
When all the parties have been identified, the grantor must be sure to have a list of all assets intended to fund the trust. The most common assets are cash or income-bearing assets, stocks and bonds or real property. The purpose of the trust account is to hold the cash used to fund the trust.
The bank will likely require the grantor or trustee to obtain a Federal tax identification number (TIN). Usually, irrevocable trusts must obtain a unique number from the Internal Revenue Service. However, a revocable living trust may utilize the grantor/trustee’s social security number if s/he is to remain in control of such funds during his/her lifetime.
After the trust has been properly executed, it must be presented to the bank by the grantor or trustee, along with the TIN and the funds to be deposited. Once properly identified as the trustee, the bank is then in a position to create an account in the name of the specific trust.
Trust accounts serve several purposes, including placing conditions on the distribution of assets, reduced cost in distributing assets to beneficiaries, avoidance of probate and reduction of various taxes.
Therefore, it is important that not only are the governing trust documents properly established but that the trust accounts themselves are dependable. For these reasons, it is advisable to solicit the help of an experienced attorney when drafting your trust documents and attempting to open up an accompanying bank account.