Best Banks For Trust Accounts

When it comes to wealth management and estate planning, trusts offer many excellent advantages. In fact, trusts can even hold bank accounts.

Trusts can also be quite complicated, which is why understanding what they are and how they work is important.

This article will take a closer look at the different types of trusts available and which banks are best for trust accounts.

In This Article

What is a trust?

At a basic level, trusts are a type of relationship in which a trustor (for example, you) gives someone else (the trustee) the right to hold assets for a beneficiary (for example, your kids or grandkids).

Keep in mind that there are several obligations and requirements when it comes to trusts, including:

  • The trustor is the owner of the assets.
  • The trustee must be an adult of sound mind.
  • The trustee has the authority to make changes (subject to agreement).
  • The trustee has a fiduciary duty to act in the best interest of any beneficiaries.
  • The trustee is ultimately responsible for filing any due tax returns.

Types of trusts

In total, there are six different types of trusts on the market, each serving a different function. Knowing about each type will allow you to set up the right kind of trust, which in turn will allow you to reach your goals.

The descriptions available here can serve as a guideline; however, you should always consult with your lawyer to make sure you abide by all provisions of the jurisdictions in which you want to open your trust.

  • Living Trust: This type of trust (which sometimes is also known as “inter-vivos”) holds a trustor’s assets while still alive and helps distribute them when they pass away. A Living Trust can be Revocable or Irrevocable.
  • Testamentary Trust: This type of trust, which sometimes is also known as a will trust, benefits a beneficiary once the trustor (the person who opened the trust) passes away. A Testamentary Trust can only be Irrevocable.
  • Revocable Trust: This type of trust can be changed or closed by the trustor during his or her lifetime.
  • Irrevocable Trust: You won’t be able to change this type of trust once it’s opened or once the trustor passes away.
  • Funded Trust: This type of trust has funds deposited into it by the trustor while he or she is still alive.
  • Unfunded Trust: An unfunded trust only has a trust agreement with no funding. These types of trusts can become funded when the trustor passes away (or remain unfunded).

What are trust accounts?

Trust accounts are bank accounts that you can open in the name of a trust. Some banks will also allow you to transfer an existing account to a trust.

Why open a trust bank account?

A trust bank account can be a great way to ensure that the trustees manage money according to your wishes.

While traditionally trusts are associated with the rich, even middle-class people find them useful for setting up wills and taking care of a family member who is not independent.

It is equally important to remember that trusts are a legal entity and can help you protect money from creditors, probate courts, and estate taxes.

What types of accounts can be opened for a trust?

Most banks and credit unions offer trust accounts. In most cases, you will be able to choose between savings accounts, checking accounts, and CD accounts.

Some banks might also offer the possibility to open money market accounts under a trust.

Private banks and brokerage firms may also provide other types of trust accounts, such as mutual funds trusts.

Before deciding on any particular financial institution with which you want to open your trust account, make sure you do your homework to see if it’s the right one for you. Knowing this is important since everyone’s requirements are different.

  • Balance Requirements. Some banks will impose a minimum balance requirement on trust accounts, more so if it’s with the private banking arm.
  • Fees. Check what kind of fees such as monthly fees and overdraft fees are applicable on the account, as these can eat away at your savings.
  • APY (Annual Percentage Yield) Rate. While this is more applicable to savings and CD account rates, higher interest rates will help you make sure more money goes into the account, with many banks offering very competitive rates.
  • Insurance. The FDIC or NCUA insures most accounts up to a certain amount which usually is $250,000.

How to open a trust account

Most banks will allow you to open a trust account as quickly as opening a personal account. The main difference here is in the type of documents you will need to submit to the bank.

The paperwork requirements vary by state. Some of the documents you’ll need:

  • Trust name: The name for your trust account, for example, ‘Smith Family Trust.’ Going for a shorter title is generally better.
  • Trust agreement: Banks will require specific information from the Trust document, including trust name, notarized signature pages, and provisions.
  • Amendments: If you’ve changed anything specific in the trust, you should always include them.
  • Beneficiaries: A list of beneficiaries who will get the trust funds if Grantor dies.
  • Death certificate: The only applicable is the trustee has passed away.
  • Last will or testament: Only applicable for testamentary trusts.

Before opening a trust account, you might want to seek legal advice to help with the complicated process. There’s no legal obligation to do so, just the peace of mind that you’re setting everything up correctly.

Your financial advisor may also be able to provide you with help and guidance.

5 Best Banks For Trust Accounts

Below are the top 5 banks that allow you to open trust accounts.

  1. Ally
  2. Wells Fargo
  3. Alliant Credit Union
  4. Bank of America
  5. Radius Bank

1. Ally Ally Bank Logo

Ally offers savings, checking, as well as CD trust accounts. These can be revocable or irrevocable, with their websites providing clear and concise guidelines to how you can use each type of trust account.

To help you save time, you can also find a checklist of all of the documents the bank will require to open the trust account, including the documents required should a trustee or beneficiary pass away.

If you already have an account with Ally, you can convert it into a trust account by filling in the Trust Conversion Request form, which you can download as a PDF from their website.

2. Wells Fargo Wells Fargo Logo

Wells Fargo offers both Individual Trustee as well as Corporate Trustee accounts. Depending on your needs and requirements, you can get either one or the other. You can also get a combination of the two types of trust accounts.

The bank also offers Special Needs Trusts and Legacy Trusts. Special Needs Trust can help you take care of someone who has suffered a disability, helping you meet cash-slow requirements, provide financial support, and keep eligibility for both state and federal benefits.

On the other hand, Legacy trusts (also known as Dynastic trusts) can help you make sure that future generations are taken care of in line with your values and ideals.

Wells Fargo is one of the best banks and also one of the largest with over 8,000 brick-and-mortar locations nationwide, so you can’t go wrong here.

3. Alliant Credit Union Alliant Credit Union Logo

Alliant tops our list of the best credit unions and offers four different trust accounts, including two savings accounts, a checking account, and CDs. Trust accounts have some limitations, including no debit or credit card, no loans or mortgages, and no IRAs.

If you’re unsure what documents you’ll need, you can visit Alliant’s website to find the full list.

Here, you will also find information about the different types of accounts on offer, which include:

  • High-yield savings
  • Supplemental savings
  • High-Rate Checking
  • Certificates

Understanding what each account offers can help you make sure that you opt for the right type of account to reach your financial planning goals.

4. Bank of America Bank of America Logo

Bank of America offers trust accounts through their private banking firm. They can manage both personal as well as charitable trusts. They offer both revocable and irrevocable trusts with a negotiable minimum investment amount.

The administration fee varies according to the account balance and type of trust, but you can expect to pay between 1.40% and 0.45%

The bank can also act as the trustee, but this will incur an additional charge that varies between 2% and 3. In this case, the minimum account balance is $20,000

5. Radius Bank (now LendingClub) Radius Bank Logo

Radius Bank offers several trust accounts, including a High-Yield Savings Account, Rewards Checking Account, and Certificate of Deposit.

If you already have any of these accounts with the bank, you can also convert them into a trust account, saving you the trouble of having to open a new account.

The bank does not have any brick and mortar branches, so you’ll need to complete the process entirely online. Even so, you can quickly contact them with an expert team ready to help you through the entire process.

The documentation you will need will vary according to the type of trust you have set-up, with the main difference being whether you’ll need an SSN (Social Security Number) or a Tax ID. Accounts are FDIC-insured up to $250,000.

Are trust accounts worth it?

While trust accounts can get very complicated, they are a useful financial services tool that can help you accomplish things that otherwise would be very difficult.

From taking care of a loved one who might not have the means to do so, to making sure that your wishes are upheld even after you die, trust accounts can be as versatile as they can be strategic.

As we mentioned earlier, they can also be tricky, which is why seeking legal advice from an estate attorney can help you make sure you set up the account successfully.

Getting professional advice will be especially helpful if you’re setting up an account to protect your money.