OK, this sounds a little harsh. I admit it. Saying “the bank is wrong” or especially “THE BANK IS WRONG!” is not as nice as simply saying they were in error or mistaken. But the attitude displayed by some banks when it comes to looking at revocable living trusts is deserving of a rebuke.
Revocable Living Trusts are one of the most useful estate planning tools out there, and they can provide a quick, painless resolution to an estate by avoiding the probate process for all assets in the trust. However, assets that remain titled in a deceased person’s name end up going through months and sometimes years of probate hell and racking up outrageous fees and charges. Many of my clients make use of a revocable living trust to avoid these hassles for their families, and then take the recommended steps to title their accounts into the name of the trust.
This is where banks step in and, armed with no *legal* knowledge but with plenty of *bureaucratic* knowledge of their own rules, end up telling my clients:
- “You can’t put your savings account into the name of your trust”
- “It’s impossible to make your revocable trust the beneficiary of your checking account”, and
- “It’s illegal to put your house into the name of your trust”
I even remember having one client tell me the bank wanted Letters Testamentary from the local probate court to move my client’s checking account into the name of their trust. I then had to explain to my client that they can’t get Letters Testamentary from the court because they (my client) were still alive, and Letters Testamentary are the permission papers a court gives an executor to start moving accounts and assets around after someone dies. On top of all of these misconceptions, some bank officials have, hopefully unknowingly, a bit of arrogance since they equate what their bank procedures tell them to do with actual law.
Sorry, but just because a bank doesn’t understand certain things doesn’t mean they get to tell their clients that something is illegal. In response, I have put together some letters that handle the most common situations where the bank simply has things wrong when it comes to revocable living trusts. Please use them wisely and without sarcasm, and please keep in mind this is not legal advice.*
“The bank insists that I need a separate taxpayer ID number for my trust” Bank Letter 1-Tax ID
“The bank says if I put my house in my trust then my mortgage will be due right away”
* Please note that this website is owned and operated by Jeffrey G. Marsocci, Esq., an attorney licensed in the State of North Carolina. This is specifically for the use of Mr. Marsocci’s clients and the professionals he works with, and just because you are using a letter does not make you one of his clients. While it is possible, or even probable, that the information here is applicable to other states in the USA, check with an attorney in your state or jurisdiction to be sure.