Christopher S. Mulvaney,

Attorney and Counselor-at-Law

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THIS WEBSITE INCLUDES GENERAL INFORMATION & THE OPINIONS OF CHRISTOPHER S. MULVANEY. IT IS INTENDED TO STIMULATE A BASIS FOR QUESTIONS RELATED TO YOUR PARTICULAR FACTUAL CIRCUMSTANCES — BEFORE YOU ACT.  THIS WEBSITE DOES NOT CONSTITUTE LEGAL ADVICE. IF YOU WANT LEGAL ADVICE, PLEASE MAKE A ZOOM APPOINTMENT TO SPEAK WITH ME.

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Gonzaga University School of Law – Spokane, Washington – Class of 2002 – Cum Laude The Latin phrase “Deo patriae, scientiis, artibus” translates to “For God and country through sciences and arts”.  The initials A.M.D.G. on the seal of Gonzaga Law School stand for Ad Majorem Dei Gloriam, which is Latin for “For the Greater Glory of God” the Motto of the Society of Jesus (Jesuits): a Catholic religious order founded by St. Ignatius of Loyola.

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Opening a checking account in the name of your revocable living trust is a crucial step in ensuring your trust functions correctly and effectively manages your assets. Here’s a guide to the process and why it’s so important: 

How to Open a Revocable Living Trust Checking Account:

1. Establish your Revocable Living Trust: Before you can open a bank account in the trust’s name, you need to have a legally established trust document in place. This involves working with an attorney to create the trust agreement, which outlines its terms, including the names of the grantor (you), the trustee(s), and the beneficiaries.
2. Your Successor Trustee may Obtain a Tax Identification Number (TIN): Your Trust’s taxpayer ID is your SSN as long as you are alive. Your Trust needs its own Tax Identification Number (also known as an Employer Identification Number or EIN), which your Successor Trustee can obtain from the IRS after you die only if the Trust was going to take longer than one year to administer which triggers the need for Fiduciary Tax Return filing by the Successor Trustee. Most Trusts are wrapped up months so no EIN is needed. The Successor Trustee just files your final 1040 Tax Return using your SSN just like you did during your life.
3. Choose a Bank or Financial Institution: Select a bank or financial institution that offers trust accounts and meets your specific needs. Some banks are known for providing trust services and managing trust funds. You might consider factors like fees, minimum balances, customer service, and the types of accounts offered.
4. Gather Required Documentation: You’ll need several documents to open the trust account, typically including:
   • Trust Agreement: The bank will need information from the trust agreement, such as the trust’s name and notarized signature pages.
   • Certification of Trust: This condensed version of the trust agreement includes essential details without revealing sensitive information about beneficiaries or assets.
5. Trustee(s) Identification: You’ll need to provide personal identification for the trustee(s), such as a driver’s license or passport.
   • Trust Amendments (if applicable): If the original trust agreement has been amended, you’ll need to provide documentation of these changes.
   • Beneficiaries List (optional): Some banks may ask for a list of beneficiaries.
6. Visit the Bank or Initiate the Account Opening Process Online: You can visit a bank branch or access the bank’s website to start the account opening process.
7. Complete the Application: Fill out the account application form, providing all the necessary details about the trust and the trustee(s).
8. Fund the Account: Deposit the initial funds into the account as required by the bank. 

Why Opening a Revocable Living Trust Checking Account is Important:

1. Facilitates Trust Administration: A dedicated trust checking account makes it easier for the trustee to manage the trust’s financial assets, such as paying bills, distributing funds to beneficiaries, and tracking income and expenses.
2. Maintains Segregation of Assets: It is crucial to keep trust funds separate from personal funds to avoid commingling, which can complicate trust administration and potentially expose trust assets to personal creditors.
3. Provides a Central Location for Trust Funds: The account serves as a central hub for all trust-related financial transactions, making it easier to track and manage the trust’s finances.
4. Enables Proper Accounting and Record Keeping: Maintaining a separate trust account helps in keeping accurate records of all transactions, which is essential for proper trust administration and reporting.
5. Simplifies Asset Distribution: When it’s time to distribute assets to beneficiaries, the trustee can easily manage these distributions from the trust checking account.
6. Avoids Probate (for assets held in the trust): Assets held in a properly funded trust, including those in the trust checking account, generally bypass the probate process, making asset distribution faster and more private. 

Important Considerations:

• Consult with your attorney: Christopher S. Mulvaney can help you draft your trust documents correctly and guide you through the process of opening the trust checking account.
• Understand Bank Requirements: Each bank may have slightly different requirements for opening a trust account, so it’s essential to check with the chosen financial institution for their specific procedures and documentation needs.
• Tax Implications: Trust checking account’s interest income will be reported on your personal tax return because the taxpayer ID of the Trust is your SSN.
• Fees and Minimum Balances: Be sure to inquire about any administration fees, minimum balances, or required opening balances before opening the account. 

FDIC insurance applies to revocable living trust accounts, but the coverage is calculated differently than for individual or joint accounts. 

Here’s how FDIC insurance applies to revocable living trust accounts:

• FDIC insurance places revocable living trust accounts in the “Trust Accounts” category.
• Coverage is based on the number of eligible beneficiaries named in the trust.
• Each owner is insured up to $250,000 per eligible beneficiary.
• As of April 1, 2024, if a trust has five or more eligible beneficiaries, the maximum coverage per owner for all trust accounts at the same bank is $1,250,000.
• If a trust has multiple owners, each owner’s coverage is calculated individually based on the number of eligible beneficiaries.
• Eligible beneficiaries include living people, charities, or non-profit organizations.
• For formal trust accounts, the account title or bank records must indicate a trust relationship, and the beneficiaries must be identified in the trust document.
• The FDIC combines the balances of all revocable and irrevocable trust accounts held by the same owner at the same bank to determine total coverage. 

In summary, FDIC insurance coverage for a revocable living trust account depends on the number of eligible beneficiaries and the total account balance at the same FDIC-insured institution. 

Example:

A single owner with a revocable living trust account naming three eligible beneficiaries at an FDIC-insured bank would have a maximum coverage of $750,000 (1 owner x 3 beneficiaries x $250,000). 

Important Notes:

• This information provides a general overview of FDIC insurance rules for trust accounts.
• While there’s no limit on the number of beneficiaries for estate planning purposes, FDIC coverage is capped at $1,250,000 per owner for all trust accounts at the same bank.
• For complex trusts or specific questions, it is recommended to consult a legal professional specializing in trusts and estates or contact the FDIC directly.

By following these steps and working with legal and financial professionals, you can effectively open and manage a revocable living trust checking account, ensuring the smooth administration of your trust and the proper management of your assets.

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Washington State residents can meet with me in Zoom/DocuSign from anywhere in the world, and I can notarize their electronic signatures because I am a remote online notary.  Just email me an image of your photo ID.