Whether you require an entire trust agreement before opening a deposit account for the trust is up to your institution (given that your institution is not acting as trustee for the trust). We are not aware of any laws or regulations that would require you to obtain the entire trust agreement before opening a deposit account for a trust. For example, neither the Customer Identification Program (CIP) regulations nor the FDIC deposit insurance regulations require you to collect a full trust document, as explained below.

The CIP regulations do not require that you collect a trust agreement for trust accounts, though it does require you to collect a name, address, and tax ID number for a trust. 31 CFR 1020.220(a)(2)(i). You may choose to verify the trust’s information by using a trust instrument, but this may be accomplished without collecting the entire trust instrument. 31 CFR 1020.220(a)(2)(ii)(A)(2). And even if you use all or part of a trust instrument for verification purposes, note that the rules require you to retain a description of the trust instrument with certain identifying information, without requiring you to retain the trust instrument itself. 31 CFR 1020.220(a)(3)(i)(B). (See the FFIEC’s BSA/AML Examination Manual for more details on verifying the identity of a trust. Trust and Asset Management Services—Overview.)

Similarly, the FDIC’s deposit coverage regulations do not require that you collect a trust agreement for trust accounts. Instead, the FDIC requires that the titles of trust accounts or your electronic deposit account records indicate that account funds belong to one or more beneficiaries on the owner’s death. 12 CFR 330.10(b). Also, nothing in the FDIC regulations would necessitate that the bank examine the trust agreement. While the FDIC regulations require financial institutions to specifically name the beneficiaries for payable-on-death (POD) accounts in account records, there is no similar provision requiring financial institutions to name beneficiaries for formal trust accounts. Instead of requiring financial institutions to keep track of trust beneficiaries, the FDIC will determine who the beneficiaries are if and when an institution fails. (We confirmed this with the FDIC’s deposit coverage hotline, which can be reached at 877-275-3342.)

In making a decision about your institution’s policy on collecting trust agreements or parts of a trust agreement (such as the first page and a signature page only), we recommend consulting with your bank counsel. Having said that, some of the public comments regarding the CIP and FDIC rules discussed above are helpful in clarifying the issues.

A comment letter from a banking trade association responding to the FDIC’s deposit insurance regulations sums up several arguments against collecting trust agreements (quoted by the FDIC at 69 Fed. Reg. 2827):

• “Unlike POD accounts, for which the only document is the institution’s account-opening record, living trusts can be lengthy, complicated documents that identify multiple tiers of beneficiaries.

• “It is often difficult for bankers to get information from accountholders who may be confused by the complexity and terminology of their living trust documents.

• “Living trusts can be amended or revoked at any time and depository institutions should not be expected to repeatedly contact their customers to determine whether their account information is current.

• “Customers might perceive such recordkeeping requirements as an invasion of privacy.”

A comment letter from a Colorado bank responding to the proposed CIP regulations sums up several additional arguments (published on the FDIC website: 1st Bank Holding Company of Colorado, September 3, 2002):

• “First, there are potential fair lending considerations related to collection of race and gender information where the account being opened is a loan account and collection of the data is not permitted by law. . . .”

• “Another reason financial institutions do not desire to maintain copies of information of verification documents relates to potential legal risks associated with non-natural entities such as trusts. Our counsel has continually reiterated that we should not maintain copies of complete trust agreements at the bank, because the bank could be held liable for unauthorized transactions conducted by the trustee. . . .”

• “The final primary reason for not desiring to maintain copies of the information relates to storage considerations and the increased potential for identification theft. . . .”