Topic: Trusts
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Does the IBA have an all-inclusive trust department document retention schedule? If not, are you aware of any other guides containing this information?
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The IBA does sell a Guide to Bank Record Retention, which contains recommended retention periods for trust-related documents based on state and federal law, but it has not been updated since 2014, and some of the information in the manual now is out-of-date. We are not aware of any other guides containing such information. If…
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We have a client who manages a deposit and savings account, which are titled as revocable trusts. The trusts are now irrevocable because the owner died two years ago. However, the accounts are “ten-year trusts” — ten years after the owner’s death, the trust will automatically split up among the four beneficiaries (or last man standing). The trust manager is one of these beneficiaries. Is each beneficiary covered by deposit insurance up to $250,000 at this time, or does the ten-year delay somehow come into play?
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We believe that the trust account funds are insured in an amount of $1,000,000, or $250,000 for each beneficiary — provided that the beneficiaries are named in the account title or in your account records and that they are natural persons, charitable organizations, or nonprofits. The FDIC’s current deposit insurance coverage regulations for revocable trust…
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Can our loan officers notarize borrowers’ signatures on mortgages and deeds of trust? Our bank heard that a law was passed in Illinois prohibiting this, but we do not know if it has become effective.
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Disclaimer: The IBA has received information from the Office of the General Counsel for the Illinois Secretary of State that changes our guidance on this question. Please review this Q&A for our most recent guidance on this subject. No, loan officers are not currently prohibited from notarizing borrowers’ signatures on mortgages and deeds of trust…
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A customer with a trust account died, and their successor trustee obtained a new employer identification number (EIN) for the trust. The trust account was opened using the deceased customer’s social security number (SSN). Is it a best practice to close the account and open a new account with the trust’s new EIN for tax reporting purposes?
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Yes, we recommend closing the trust account with the deceased customer’s SSN, opening a new account with the trust’s new EIN, and having the successor trustee sign a new signature card. The IRS requires a trust to obtain a new EIN if the trust changes to an estate, a living trust changes to a testamentary…
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Can a consumer loan guaranty agreement include language allowing us to exercise a right of setoff in a guarantor’s deposit accounts? We want to extend an unsecured personal loan to a trustee with the trust as the guarantor, and we want to reserve a right of setoff in the trust’s deposits.
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Yes, we believe you may include language in a guaranty agreement allowing your bank a right of setoff in the guarantor’s deposits at your bank and that a trustee may pledge trust property to guarantee loans made to the trustee — provided that both activities are within the trustee’s powers, as confirmed by a certification…
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A husband and wife with separate trust accounts want to open a checking account with their trusts listed as owners as tenants in common. The account would be opened using only the tax ID of the husband’s trust, and checks made out to either trust would be deposited into the account. Each trust would own a percentage of what is in the account, and when either the husband or wife dies, their trust’s assets would go to their individual beneficiaries. Can we set up a checking account like this, and would there be any negative tax implications?
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No, we would not recommend allowing two separate trusts to open a joint checking account, as this arrangement could risk the commingling of funds between two separate entities. Further, distributions from such an account could be susceptible to dispute by each trust’s respective beneficiaries, and this arrangement could cause a trustee to breach their fiduciary…
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Can a trust open a payable on death (POD) account? We are concerned that a POD designation could conflict with the provisions of the trust agreement.
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While Illinois law does not expressly prohibit trusts from opening POD accounts, we do not recommend permitting a trust to establish a POD account. A trust would not trigger the POD provisions because a trust is an entity that does not die, even if its settlor dies, and, as you noted, the POD designation could…
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We require owners, partners, directors, and officers of an entity to guarantee loans made to the entity. If a borrowing entity (Company A) is owned by another entity (Company B), are we violating the Equal Credit Opportunity Act (ECOA) if we require the owner, partners, directors, or officers of Company B to guarantee Company A’s loan without obtaining a joint intent form? Also, if a borrowing entity is owned by an individual’s trust, can we require the trustee to guarantee the loan without obtaining a joint intent form?
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We recommend obtaining a joint intent form when requiring personal guarantees from individuals who serve as owners, partners, directors, or officers of a business that is not the loan applicant — unless such guarantees are necessary for the applicant to qualify for the loan. We believe that you may require a trustee’s guarantee as representative…