Is it a best practice to accept a trust account certification in lieu of requiring the entire trust agreement when opening a trust account? One of our new employees noted that we could be held liable for a trustee’s wrongdoing if we obtain a copy of the entire trust agreement.

There is no law that expressly requires you to obtain the entire trust instrument when opening a trust account. For example, the Customer Identification Program (CIP) rules require you to collect a name, address, and tax ID number for a trust, but they do not require that you obtain the trust instrument itself when a trust account is opened.

Illinois recently enacted a new provision in the Trusts and Trustees Act, effective August 10, 2015, that establishes procedures for accepting a certification of trust in lieu of requiring the entire trust instrument when a trust account is opened. Notably, under the new law, while you still may request the entire trust instrument instead of obtaining a certification of trust, you may be liable for damages if a court determines that the request for the entire trust instrument was not made in good faith.

There also are protections in the Illinois law when you obtain a certification of trust that meets the new law’s criteria. A person who acts in good faith reliance upon a certification of trust is entitled to act as if the representations in the certification are true and is not liable to any person for actions with respect to the trust. In addition, any transaction that is entered into based on a certification of trust is enforceable as if the representations in the certification were correct.

For resources related to our guidance, please see:

Customer Identification Program Rules, 31 CFR 1020.220(a)(2)(i) (The Customer Identification Program (CIP) rules require you to collect a name, address, and tax ID number for a trust, but they do not require that you request the trust instrument itself when a trust account is opened.)

Trusts and Trustees Act, 760 ILCS 5/8.5(a) (“Instead of furnishing a copy of the trust instrument to a person other than the beneficiary, the trustee may furnish to the person a certification of trust containing the following information: . . . .”)

Trusts and Trustees Act, 760 ILCS 5/8.5(f) (“A person who acts in reliance upon a certification of trust without knowledge that the representations contained therein are incorrect is not liable to any person for so acting and may assume without inquiry the existence of the facts contained in the certification. Knowledge of the terms of the trust may not be inferred solely from the fact that a copy of all or part of the trust instrument is held by the person relying upon the certification.”)

Trusts and Trustees Act, 760 ILCS 5/8.5(g) (“A person who in good faith enters into a transaction in reliance upon a certification of trust may enforce the transaction against the trust property as if the representations contained in the certification were correct.”)