THE BLOG

Estate Planning Made Easy: Establishing Trust Bank Accounts

07/02/2013 05:27 pm ET | Updated Sep 01, 2013
  • Diane Morais President and Chief Executive Officer of Ally Bank
Getty

"How can I ensure the financial security of my family after I'm gone?"

It's an important question that we all wrestle with -- and one that has fueled an expansive network for estate planning products and services to address this important concern. If you're like most people, chances are you've been working a lifetime to build a nest egg that you can pass along to your children and loved ones. An important element of the estate planning strategy is maybe the simplest component of them all -- how to handle common bank accounts.

With many Americans now able to save for the first time in years, many are evaluating bank accounts that are ideally suited for trusts -- often on the advice of their financial planner -- to firm up their own savings while simultaneously easing the burden on their beneficiaries. There are numerous benefits:

  • Assets secured in accounts for trusts can be transferred almost immediately and without extra costs to beneficiaries when necessary
  • Accounts for trusts can be established in any amount, and those established at Member FDIC banks are insured for at least up to $250,000 per depositor
  • Some banks that offer deposit products for trusts -- such as Ally Bank -- allow them to be established by converting an already-existing savings, money market, or CD account
  • Any individual -- or organization -- can be named as a trustee

Establishing a trust
Establishing accounts for trusts does require a few steps; however, the process is hardly painful. The first step is to set up a living trust agreement, which transfers some or all of your assets to someone who will manage the trust (typically, people name themselves as the trustee; this allows them to retain control of the trust's assets). As part of the trust agreement, you also name beneficiaries who will inherit the trust upon your death. Establishing a living trust requires some paperwork and it's recommended to involve a lawyer in drafting the agreement.

The second step is even easier -- contact a bank that offers deposit accounts for trusts and provide them with the documentation. The process will differ based on the bank you use, but many, including Ally Bank, will provide step-by-step instructions for establishing these accounts.

The short process more than makes up for itself when one considers that the primary benefit of an account for trust is the ability to bypass the probate process upon the grantor's death -- which may save quite a bit of money and time for trustees as well as protecting your privacy by avoiding the often public probate process.

Do yourself a quick favor -- the next time you talk to your lawyer, financial advisor, or even bank customer service representative, ask them how an account for trust might fit into your estate planning strategy.