Topic: Trusts
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A customer who named her husband as the beneficiary of her health savings account (HSA) prior to their divorce has died. The executor of the customer’s estate is claiming that the HSA belongs to the estate and not the beneficiary, since he is a former spouse. Is the executor correct?
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We do not have enough information to determine if the executor is correct, and due to the complexity of this issue (as discussed below), we recommend obtaining the advice of bank counsel or requesting that the executor provide a court order to your bank before you distribute the HSA. If the HSA qualifies as a…
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We have an attorney customer who issues checks to his clients drawn on his client trust account. When the clients (who are not customers) come to our bank to cash the checks, we have been issuing them personal money orders signed by a bank employee with the bank listed as the remitter. We do not want to list the clients as the remitter since our BSA policy prevents us from selling monetary instruments to noncustomers. We also do not want to issue cashier’s checks to the clients because we would like to be able to put a stop payment on an item if it is lost. Will this work, or will signing the money orders cause them to function like cashier’s checks?
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We believe that having your bank representative sign the customer’s personal money orders would cause them to be treated like cashier’s checks, in which case you would not be able to place a stop payment order on these items. A cashier’s check is defined in the Uniform Commercial Code (UCC) as “a draft with respect…
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Can an account in the name of a living trust be closed by an individual who presents letters of office appointing them as guardian for the estate/person of the trustee? The guardian intends to move the trust account funds to an account in the guardian’s name at a different financial institution.
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If the guardian’s intent is simply to move the funds to another trust account at a different financial institution, we do not believe that a court order would be necessary. The guardian would not be revoking the trust or distributing trust property in that case. On the other hand, a court order is required before…
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An IRA customer died, leaving her trust as her beneficiary. The deceased customer’s son is the trustee of the trust, and he requested that the funds be transferred to a non-IRA savings account for the trust that he had opened. We closed the IRA as a death distribution and cut a cashier’s check payable to the trust. Since the IRA was closed as a death distribution, and not as an internal distribution to an IRA product, will the 1099-R that we issue have tax implications?
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Yes, the trustee’s decision to place the IRA funds in a savings account will have tax implications, although we are not qualified to address exactly what those tax implications will be. Generally, when an IRA is distributed to a beneficiary, the beneficiary must roll over the distribution into a new IRA within sixty days of…
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One of our customers recently passed away, and his son is successor trustee for the customer’s personal trust. The deceased customer held a lease on two safe deposit boxes individually, not in the name of the trustee. The trust document does not mention safe deposit boxes. Can the son access the box as trustee of his dad’s trust, and what documents do we need?
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Yes, we believe that the son may access the safe deposit boxes, provided that the trust document includes generic language covering the contents of the safe deposit boxes and the son can provide a will naming the son as executor of his father’s estate. Your bank may wish to request a Certification of Trust form…
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In Illinois, can a trust be named as a beneficiary on a payable on death (POD) account? If so, can a trust be named as a beneficiary on a business account held by an entity other than a sole proprietorship?
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Under Illinois law, a trust may be named as a beneficiary on a POD account. However, we do not believe that a business entity (such as a corporation or an LLC) may designate a POD beneficiary of any kind. The Illinois Trust and Payable on Death Accounts Act (“Act”) allows “one or more persons opening…
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We do not open safety deposit boxes for trusts, but we do open safety deposit boxes for businesses and nonprofits. Are there any laws in Illinois that govern who may open a safety deposit box?
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We are not aware of any law that prohibits a state bank from leasing a safe deposit box to a trust, and the Illinois Trusts and Trustees Act specifically permits a trustee to enter into a safety deposit box lease. Your bank may wish to request a Certification of Trust form from the trustee to…
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We are looking for guidance on how to title a mortgage loan when a living trust is involved. For example, if Jen Test is the trustee of the Jen Test Revocable Living Trust dated 1/1/18 and the mortgaged property is held in the trust, how should this be reflected in the mortgage and deed? What if the property is not held in the trust, but the trust is a borrower on the loan? Also, our LaserPro documentation system requires that we input the names of any natural person beneficiaries of trust borrowers when a loan is made for personal, family, or household purpose. Would this apply to both living trusts and land trusts?
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The mortgagor described in the mortgage should be the party that holds title to the property. If the property is held in a living trust, the mortgagor would be listed in the name of the trust (e.g., “Jen Test Revocable Living Trust dated 1/1/18”), and the trustee would sign the mortgage on behalf of the…
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Our BSA Officer does not want to open new trust accounts until we have tax ID numbers for every beneficiary of the trust, as well as other information — such as the legal fees and our own trust fees that we will charge to the trust. Delaying these account openings until we have collected this information is causing operational difficulties, for example when we urgently need to pay bills using trust funds, and it can be difficult to track down beneficiaries’ tax IDs, particularly for minors. Our preferred practice would be to open the trust accounts with the trust’s tax ID, in addition to other identifying information, and to obtain the beneficiaries’ lDs as soon as possible thereafter (while ensuring that we do not make any distributions to the beneficiaries in the meantime without obtaining their taxpayer IDs and running OFAC checks).
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We believe that FinCEN’s customer identification program (CIP) rules permit your bank to establish a procedure in which trust accounts are opened with the trust’s taxpayer ID, and you collect the beneficiaries’ taxpayer IDs “within a reasonable time” after the account has been opened — particularly given the safeguards your institution is taking before making…
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We had a customer bring in a check payable to her deceased mother’s estate. She wanted to deposit the check into her parents’ family trust account. We advised the customer that she first must open an estate account to deposit the check before it can be transferred to another account. Are we correct that a check made out to an estate must be deposited into an estate account?
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Yes, you are correct that generally, a check made out to an estate only should be deposited into an estate account. Depositing a check made out to an estate into a family trust account could result in a breach of the Uniform Commercial Code (UCC) warranties. When delivering the check to the payor bank for…