A trust is its own legal entity and can have its own bank account. Finding the right trust bank account, like those offered by Ally Bank, Charles Schwab, or J.P. Morgan Private Bank, can help ensure that your assets are managed correctly and held for your designated beneficiaries.
However, trusts can be complicated. That’s why it’s essential to do your due diligence when researching the best banks for trust accounts. You may also want to work with an estate attorney to ensure everything is set up according to your wishes.
What is a trust account?
A trust account is a type of bank account used to manage the assets a trust holds. A trust is a legal contract between a grantor and a trustee for the benefit of a third party, known as a beneficiary.
- The grantor: This is the person who owns the assets they want to be held for future beneficiaries.
- The trustee: This is the person or entity that accepts the assets and agrees to hold and manage them for the benefit of the beneficiary.
- The beneficiary: This is the person for whom the entrusted assets are being held and managed.
Once assets have been moved under the trust’s name, a trust account can be established at a bank or financial institution to hold the funds until it is time to disburse them to a beneficiary.
The trust’s assets can include principal items like cash, stocks, bonds, and bank accounts and illiquid assets like real estate, mining rights, or business interests.
The assets can generate income over time (like interest, dividends, rent, or royalties) which can be reinvested for the benefit of the trust, and, eventually, the beneficiaries.
The best banks for trust accounts
Ally Bank is best known as an online bank that often offers good annual percentage yields (APY) on their checking and savings accounts.
Ally also offers irrevocable and revocable trust accounts, which are deposit accounts in the name of a trust. Here is how they differ.
- Irrevocable trust accounts can’t be changed or revoked by the grantor without the consent of the beneficiaries.
- Revocable trust accounts can be changed or revoked by the grantor at any time.
Ally trust accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to the maximum the law allows.
Learn more about FDIC insurance.
Who can open a trust account with Ally Bank?
To open a trust account with Ally, you’ll need the Certification of Trust or Trust Agreement document provided by your estate attorney.
You’ll also need to provide the name and contact information of the trust's grantor and the trustees, the people you select to run and administer the trust. Keep in mind that you can’t appoint Ally as a corporate trustee.
Finally, you need to fill out Ally’s trust account application and upload the necessary documents.
Customers can include multiple accounts under the trust once established, including saving accounts, checking accounts, CDs, and other investment types. Adding additional accounts may require you to fill out a second application or contact Ally by phone once the initial application has been processed and approved.
Because Ally is an online-only bank, the administration fees to set up and maintain trust accounts can be lower than at traditional brick-and-mortar banks. However, since Ally doesn’t have physical branches, you won't be able to drop in and ask questions.
Charles Schwab Trust
Perhaps best known for its investment services, Charles Schwab provides multiple trust account options. They include
- Revocable trusts
- Irrevocable trusts
These trusts can help protect assets, facilitate charitable giving, and assist with wealth management and transfers between married partners, children, and grandchildren.
Schwab can serve as a corporate trustee. It offers administration services like income and principal distributions according to your trust language, preparing and filing tax returns, and keeping accurate records for reporting purposes.
The bank can also offer investment services like educating beneficiaries on investment resources and financial planning, making portfolio adjustments, and professional investment management.
Who can open a trust account with Charles Schwab Trust?
Having Schwab manage your trust account can be expensive and may require a significant investment. With Schwab Personal Trust Services, clients pay a 0.50% fee on the first $5 million invested and 0.25% on the next $5 million. The minimum annual fee for Personal Trust Services is $5,000.
For people without millions in trust assets, Schwab offers the Schwab One Trust account. This account has $0 monthly service fees, $0 account opening fees, and in some instances $0 commissions. However, you may have to pay trading and brokerage fees depending on the types of investment you choose.
Wells Fargo Private Bank
Wells Fargo offers trust accounts through its private banking service, The Private Bank. Through Wells Fargo’s estate planning services, customers can create the following:
- Special needs trust to protect assets for a beneficiary with disabilities
- Legacy trust to help provide for multiple generations and minimize tax liability
As part of its services, Wells Fargo customers can choose to appoint an individual trustee (like a trusted family member, friend, or attorney) or to hire Wells Fargo as a corporate trustee.
Hiring Wells Fargo as the corporate trustee allows the bank to act in a manner that helps you and your loved ones ensure the trust requirements are followed exactly as written.
Who can open a trust account with Wells Fargo Private Bank?
According to Wells Fargo, people with more than $1 million in assets or those with significant non-financial assets should consider a corporate trustee to help navigate the intricacies of trusts.
You can also designate co-trustees through Wells Fargo, where two or more people or an individual and a corporate trustee work together to administer the trust.
Wells Fargo requires prospective trust account customers to call for information about minimum asset requirements and doesn’t provide its trust management fees online.
In addition to trust account management, The Private Bank from Wells Fargo offers premium checking, savings, and CD accounts.
J.P. Morgan Private Bank
J.P. Morgan Bank is the largest bank in the United States and offers various trust services. Like many banks, J.P. Morgan provides trust accounts through its Private Bank instead of its general banking department.
The trust situs (the state where the trust originated) will determine the type of laws you follow and the disclosures you must make.
Who can open a trust account with J.P. Morgan Private Bank?
J.P. Morgan Private Bank offers general trust services in the U.S. and internationally and trust situs following Delaware’s jurisdictions. Many states have trust-friendly laws, but Delaware has one of the most established trust programs and was one of the first states to provide tax and asset preservation benefits.
The services you qualify for, and their costs, may depend on your total account balance. Specific services and their associated fees and balance requirements are not posted on the J.P. Morgan Private Bank website, so you must contact a Private Bank office to see if you qualify.
J.P. Morgan Private Bank also specializes in illiquid assets. Their specialized teams can help you preserve the long-term value of non-financial assets in your trust, like private business interests, real estate, mineral assets, and handling philanthropy designations.
U.S. Bank is one of the largest banks in the nation and offers various personal and consumer banking services. It also offers two types of trusts to its customers.
- Revocable trusts
- Irrevocable trusts
Who can open a trust account with U.S. Bank?
Like other banks on our list, U.S. Bank has multiple types of trust accounts but does not include them on its website. The bank recommends calling a local branch to speak with a banker who can help you find the best trust account and discuss the associated fees and balance requirements.
U.S. Bank can provide trust situs in multiple jurisdictions, including Delaware, Nevada, and South Dakota. Working with a bank and estate attorney to decide on the best place to establish your trust can help you avoid excess income taxes, offer privacy and creditor protection, and even determine the length of time your trust can operate.
What types of trusts are available?
There are many types of trusts, each with a specific purpose or job. Finding the right trust that best meets your needs can be tricky, so working with an estate planning attorney is vital.
Some of the most common types of trusts include the following:
- Revocable trust: A revocable trust is also called a living trust and can be changed after it's created. Revocable trusts function similarly to a will and detail how your assets should be distributed after death. The primary difference between a will and a revocable trust, however, is that the revocable trust allows you to avoid probate, which can be a long, public process. Revocable trusts can be set up in multiple ways and may include language that turns a revocable trust into an irrevocable one after your death.
- Irrevocable trust: As the name implies, you can’t change an irrevocable trust once it's been set up. The assets included in the trust are removed from your estate, and the trust files and pays its own tax return. If you use your will to set up an irrevocable trust, it's called a testamentary trust. You can also set up an irrevocable trust before your death to help protect your estate and assets from creditors and estate taxes and to ensure your assets are distributed as you intended.
- Charitable trust: Charitable trusts help you leave a lasting legacy to an organization that has significance in your life. You can set up different philanthropic trusts that provide funds to your beneficiaries and the organization in various configurations and varying tax implications.
- Special needs trust (SNT): If you have a child or family member with special needs, setting up a trust to care for them after your death is often a good idea. These trusts are generally created for individuals who receive government benefits due to a disability. Making the person receiving benefits your beneficiary in a will can make them ineligible to continue receiving government benefits due to income restrictions. SNTs are set up so you can provide for your family member after your death while keeping them eligible for benefits.
- Grantor retained annuity trusts (GRATs): A GRAT is designed to last for a specific time frame and is a way to help people minimize taxes on financial gifts to beneficiaries. With GRATs, grantors move assets into a trust and receive regular annuity payments. When the trust term ends, any remaining assets are transferred to named beneficiaries tax-free, but your beneficiaries may still have to pay estate taxes, depending on the disbursement size.
- Qualified personal residence trusts (QPRTs): A QPRT can help you transfer real estate holdings to your beneficiaries. You can set up a trust for a specific time, and if you’re still alive when the trust ends, the property is moved from your estate to your beneficiary.
- Domestic asset protection trusts: This type of trust can help protect assets from creditors, although it isn’t allowed in every state. A domestic asset protection trust can help ensure that family heirlooms go to your children (or designated beneficiaries) in case of a divorce or other family strife.
- Generation-skipping trusts: Another way to help reduce estate taxes is to skip a generation. A generation-skipping trust leaves your assets to your grandchildren, passing over your children to help avoid the estate taxes they would likely pay if they were to be your direct beneficiary.
This is just a small sampling of the types of trusts available and the protections and assistance they can provide.
As you consider setting up a trust, be sure to reflect on what it is you are looking for from a trust. Work with an appropriate attorney and tax professional to help narrow down your options and make the best choice for you.
What to look for in a bank for trust accounts
Finding the best banks for trust accounts can take dedicated research. Understanding some of the primary features of a trust account and comparing your options among those features can make finding a solution that works easier for you.
1. Minimum balance
Each bank requires a different minimum balance for trust accounts. Finding the best trust account to fit your assets can help ensure your final wishes are met as you intended.
Although many trust accounts have balance requirements geared toward the extremely wealthy, people with more modest estates can also benefit from creating a trust.
As you research trust accounts, don’t be afraid to call a bank and ask them what their minimum balance requirements are, and if you don’t meet them, ask what services they offer and how they can help you.
Before you move existing accounts or assets into a trust, remember that some account types, such as brokerage or investment accounts, might not have the same protection that you get with checking and savings accounts at banks and credit unions.
As you work with your lawyer to develop a trust, consider the types of assets and accounts you have and how they are protected. Most investments, like stocks and bonds, are not covered by federal insurance.
Although trusts may contain some investment assets not generally insured, the owner of a revocable trust is insured up to the $250,000 FDIC insurance limit, just like a regular bank account.
The exact amount of insurance can get complicated and is based on the number of beneficiaries a revocable trust has and the assets included. Generally, account balances are insured if they are less than the insurance limit. The excess amounts are uninsured if the account balance exceeds the allowed balance per beneficiary.
Irrevocable trust accounts generally have a flat insurance limit of $250,000.
3. Low fees
Trustee fees are payments for managing the trust and can be a significant expense. They can be paid to an individual or a corporate institution for maintaining the trust, including trustee services like filing tax returns, distributing assets to beneficiaries, or rebalancing and overseeing investments in the trust.
Many trusts pay trustees like they do financial advisors, paying a percentage of the value of the trust to the trustee bank each year. This typically happens when you have a trust with many details to manage.
A flat fee or hourly rate might be used for smaller trusts instead of a percentage of what’s being managed.
Banks may also charge separate maintenance fees on trust accounts, which can eat into your trust balance considerably. When you appoint a corporate trustee through a bank, you may pay much higher fees than if you had a trusted friend or family member act as trustee.
Be sure to thoroughly research and understand the fee structure of the financial institution you’re working with. Ask detailed questions and get the fee structure in writing so that you are prepared before the trust account is created.
When creating a trust and looking for a place to hold your assets, look for a bank that is easy for you and your beneficiaries to work with. Research multiple banks to see which will best meet your needs, and visit a branch or speak with a banker who can answer your questions in detail. Make sure that you can envision working with them for several years.
Ensure your beneficiaries are also comfortable working with the trust bank and trustees. If you have corporate trustees, make sure at least one of them is familiar with your beneficiaries and that your family members feel comfortable going to that person with questions or concerns.
Does a trust need its own bank account?
Having a bank account for your trust can help you move assets, such as cash, into the trust. Keep in mind that when you include assets (like a checking or savings account) in an irrevocable trust, the ownership of that account is transferred from your name into the name of the trust.
Once an account is moved into a trust, you cannot access the funds being held, so you shouldn’t include accounts that you still need to pay bills from or access for regular living expenses. You must also change the ownership of annuities and safety deposit boxes if you include them in your trust.
Does Bank of America offer trust accounts?
Bank of America offers irrevocable and revocable trust accounts through its private banking solutions. Bank of America does not disclose its minimum balance or fees for its trust accounts on its website. However, if you want to learn more about its trust options, Bank of America recommends contacting a private client advisor.
What are the disadvantages of a trust?
Trusts can become highly complicated. Because a trust has to account for many different circumstances or scenarios, it must be written in extreme detail by an estate attorney. Since a trust is administered without probate or the involvement of the courts, it must be as specific and accurate as possible to ensure it is properly executed.
Other disadvantages of a trust include the cost of setting up and maintaining it and the precise record-keeping required. Even though setting up a trust means avoiding probate, which can be costly and time-consuming, a trust still involves an attorney, filing fees, title transfers, and compensation to trustees.
Setting up a trust can be a complicated process that needs to be handled by an attorney familiar with estate planning and trust creation. Finding the right bank to manage your trust account after it has been created can ensure your beneficiaries are well-educated before they inherit your assets.
Be sure to research your trust account options before signing up, and pay attention to account minimums, insurance coverage, and fees charged by the bank.
To determine the best banks for trust accounts, we first compiled a list of banks that offer this account option. We then gathered information about the features available on trust accounts offered by these banks to determine what was best about each one.
We also considered additional key factors for trust accounts, including insurance, bank reputation stability, and more. It’s important to note that we did not review every available option in the market, and our recommendations aren’t listed in a specific order.
Our goal is to provide readers with an overview of the best banks for trust accounts to help readers make informed decisions when choosing a bank for their trust account needs.
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