Does the Bank Need a Copy of Your Trust?

One of the benefits of setting up a trust is to keep your financial affairs private. At AmeriEstate, we often field questions from our clients about how trusts work. We get a recurring question: “Why does the bank need a copy of my trust?” Typically, the question arises after they create their trust and attempt to move bank accounts into the trust, resulting in the bank asking for trust documents to proceed.

If you’ve been asked to provide trust documents to your bank, you have a right to be concerned about the lack of privacy that this action would lead to. Let us set your mind at ease immediately. You do not need to give your bank a copy of your trust. We will walk you through why your bank might ask you for trust information, what the benefits of a trust are, who should have a copy of your trust and what you can provide your bank instead of a copy of your trust.

Why Does the Bank Claim To Need a Copy of Your Trust?

Banks ask for trust information under specific circumstances. The most common we see are the following three:

Opening a new bank account for the trust
Moving an existing account into a trust
Changing loan terms or refinancing a loan for an asset in a trust

The first situation occurs when setting up a new trust, whether revocable or irrevocable. Under the second circumstance, the grantor moves an existing bank account into a trust. The last one surprises clients, as banks often insist that they won’t approve the loan until they see the entire trust document. Your bank does not need a copy of your trust, even to approve a refinanced loan for an asset in the trust.

Does the Bank Need a Copy of Your Trust | AmeriEstate Legal Plan

What Are the Benefits of a Trust?

A trust is an essential part of your estate plan. It is a financial vehicle that allows you to protect your assets during your lifetime and for your heirs. The two most common types of trust are revocable and irrevocable. A revocable trust is also known as a living trust.

Living trusts give you access to and control over the assets in the trust while you still live, whereas you relinquish both when you establish an irrevocable trust. Both trusts offer the following benefits:

Privacy: Unlike wills, which become part of the public record, trusts are private. Only the trustees and those you provide copies to will know the contents of the trust. No one has a right to see your trust documents. If your banker says the bank needs a copy of your trust, the banker may not be familiar with how trusts work. You can provide the bank with the information it needs in a trust certificate without providing the entire trust document.
Probate Avoidance: Trusts are not subject to the probate process. Though paying off debts is a part of the trust distribution process after you pass, your assets will not go through probate court. They remain private and shielded from anyone claiming a right to them. Your heirs will also not have to pay for the expensive court proceedings.
Conflict Avoidance: Family dynamics often change after a loved one passes. Even family members previously on great terms can begin fighting over assets in a will. Though a judge considers the benefactor’s wishes in a will, the judge has the ultimate say over who receives which assets. A trust gives you greater control over who receives which of your assets.
Tax Savings: Though trusts have tax responsibilities, you do not pay taxes on the principal assets. The trust must file income taxes and pay taxes on any income earned during the year, including interest income.

Irrevocable trusts also shield your assets from creditors and legal claims.

Who Should Have a Copy of Your Trust?

Never give someone else the original trust document. Keep that in a safe location, and make sure your successor trustee knows where to find it. You can, however, make copies of the document and provide it to others. Though the bank doesn’t need a copy of your trust, should anyone else have it? There are no rules or laws about who should have a copy of your trust.

You can give a copy to whomever you like. Remember that anyone with a copy of the document will have sensitive information about your finances and heirs. You may want to provide a copy to the person who serves as your financial power of attorney and your successor trustee. Some of our clients give copies to beneficiaries. However, consider factors such as family dynamics when deciding whether to provide copies to beneficiaries.

What Should You Provide the Bank?

Whether opening an account for the trust, moving bank accounts into the trust or refinancing an asset held in the trust, your bank does have a right to ask for information about the trust. However, the details they need are limited and do not include financial elements. Typically, you can fill out a certificate of trust that provides them with the only information they can request.

Certificate of Trust Information

A certificate of trust verifies that the trust exists and who serves as trustee. It is a legal document, though no official state or federal form exists. Many banks have their own certificate of trust document. If your banker says that the bank needs a copy of your trust, ask the banker whether the bank has a certificate of trust.

This one question may be enough to prevent any conflict between you and the banker. If the individual is unaware of your right to withhold the trust document or the bank’s formal documentation process, asking about the certificate of trust can spur the conversation in the right direction. If the bank doesn’t have its own document, AmeriEstate can help you set one up.

Certificate of Trust Elements

A certificate of trust is an abbreviated version of the trust consisting of only one or two pages. Your state has its own laws about what the document must include, but these laws do not require you to provide sensitive financial information. However, you should research your state to determine what the regulations specifically require. Typically, you will need to provide the following:

Name of the trust
Trust’s tax ID
Name of the grantor
Trust type
Identity of the trustee
Date you created the trust
Trustee powers

You may also need to provide the name of the successor trustee. If you want to refinance an asset in the trust, you must give the bank a copy of the asset title.

Certificate of Trust Process

If your bank needs a certificate of trust, determine whether they have their own form. If they do, obtain the document. We recommend that you ensure the bank’s form adheres to your state’s legal guidelines. If the bank does not have a form, you can find downloadable versions or work with an AmeriEstate attorney to help you through the entire process.

After you have a form that will work in your state, fill out the form, but don’t sign it. You and any other trustees will need to sign the certificate of trust before a notary. After you finish the document, you may need to file it with your county, depending on your state’s laws.

Who Can Help When Your Bank Says It Needs a Copy of Your Trust?

At AmeriEstate, our attorneys have the experience to help when your bank says it needs a copy of your trust. We can help you obtain a certificate of trust that adheres to state regulations and complete and notarize it. Contact us to find out how we can help.

Sources:

https://www.nerdwallet.com/article/investing/estate-planning/certificate-of-trust

https://trustandwill.com/learn/how-to-transfer-bank-accounts-into-a-trust