Utilizing a trust can be a great way to transfer funds, property, and assets, and ensure that they are used for specific purposes. A trust checking account can be a great tool to help you manage your trust and safely hold the funds. You can use this guide to help you explore the uses and benefits of having a trust and a trust checking account.
What is a Trust Checking Account?
A trust checking account is a type of checking account that is held and utilized specifically by a trust. Trustees from that trust can utilize the funds in the account for expenses, fees, and can also distribute those funds and assets during a closure of a trust.
Why Do You Need A Trust Checking Account?
Having a trust checking account can ensure that funds and assets are kept safe and are utilized for their intended purpose. This enables the owner of the trust to specify how and where their assets are used and to ensure that the assets are available to the trustees. This can also minimize any disputes between trustees regarding the funds.
How to Set Up a Trust Account
Setting up a trust account may seem overwhelming at first, but with a little planning and guidance, it can be a decision that will help you in the future. Here are the steps to set up a trust account:
1. Choosing a Trust
First, you’ll need to decide which type of trust best fits what you’re looking for and what your needs are. There are a variety of different types of trusts to fit specific purposes. Often people will utilize a financial advisor to guide them through this step and help them explore options. James Aoki, our Financial Advisor here at Wasatch Peaks, is here to help and can assist you as you plan for your future. While there are other trust options available, including charitable trusts, special needs trusts, spendthrift trust, and more, the two most common trust options include:
- Revocable Trusts: Often referred to as a living trust, this type of trust can be modified or even revoked depending on the grantor of the trust. This is created during the lifetime of the trust grantor and the assets are only transferred to the beneficiaries after the death of the owner.
- Irrevocable Trusts: This type of trust cannot be modified or revoked unless permission has been given by the beneficiary or beneficiaries of the trust. Once the grantor of the trust places their assets into the trust, they forfeit their rights of ownership. This is often used for estate and tax purposes.
2. Specifying the Details
Once you have decided on which type of trust you would like to utilize moving forward, you’ll next need to determine the logistics of the trust. You’ll need to make decisions about:
- Trust Grantor: This is the individual who is creating the trust, whether that is you or someone else.
- Assets and Property: It’s important to specify what exactly will be included in the trust and how the grantor will want those assets to be managed and distributed.
- Beneficiaries: The beneficiaries are those who will be receiving the assets and property from the trust.
- Trustee: The trustee of the trust will be the one who manages the trust and executes the grantor’s wishes and instructions. In living trust, the trust grantor will be the trustee and will need to choose a successor trustee in case of death or incapacitation.
3. Complete and Fund the Trust
To complete the trust, you’ll need to formalize it with a trust document. This process can be a bit more complicated in ensuring all the correct information is provided and the paperwork can vary between different types of trusts. While some people may do this themselves, typically people will utilize the assistance of a professional, typically an attorney who specializes in estate planning or trusts. Wasatch Peaks has partnered with a local attorney to offer Wills, Trusts and Estate Planning services for our members. These documents will also need to be signed in the presence of a notary and may require witnesses be present.
Once the trust is official, it can now be funded. This can be done by opening a trust checking account at the financial institution of your choice. You’ll need to provide the paperwork for the trust, as well as the names and contact information for any trustees. Assets may need to change ownership to the trust with a new title or special documents, while funds may be deposited into the account all at once or over time. Your financial institution or financial advisor should be able to guide you through this process.
If you’ve been considering a trust, it may be a good time to start discussing the benefits and exploring options with a financial planner. A trust checking account can help you ensure the safety and accessibility of the funds and assets.
