To avoid probate, bank accounts must either be retitled into your Trust or assigned a Payable on Death (POD) beneficiary. Retitling the account in the Trust’s name provides the strongest protection, giving your successor Trustee seamless access if you pass away or become incapacitated. Naming the Trust or an individual as a POD beneficiary bypasses probate at death, but it offers no incapacity protection and can create issues if beneficiaries are minors or predecease you. Unassigned personal accounts go through probate, though a Pour-Over Will acts as a safety net to catch forgotten assets and transfer them to your Trust.

You’ve set up a Trust, and now you’re in the process of funding it. And you’re wondering: Should your bank accounts be in the Trust? Here’s what you need to know.

What happens to a bank account that isn’t in your Trust?

It depends on how the account is structured.  A bank account owned in your name alone generally becomes part of your probate estate unless it is otherwise structured to pass outside probate, such as through a valid POD designation. However, many people have their accounts set up with a Payable on death (POD) beneficiary. If you die without a POD designation on your account and the account is not owned by your Trust, the bank account goes through Georgia probate.

What happens to a bank account that I forgot to put inside my Trust?

If you have a Trust, but an account isn’t inside it or properly designated, these assets are outside of the Trust. Since the account isn’t owned by the Trust, the Trust can’t help that account, and that asset must go through probate. This is what we mean when we talk about the unfunded Trust problem.

Notes about the Pour-Over Will 

When a Trust maker creates a Trust, they should also create a Pour-Over Will. A Pour-Over Will is designed to serve as a safety net for assets that were not properly transferred to your Trust during your lifetime and that do not pass another way, such as via a beneficiary designation. Those assets may still need to go through probate, but the Pour-Over Will directs the assets to your Trust after the probate process. A Pour-Over Will essentially says: I have set up a Trust and it is my desire that my assets should be distributed through my Trust upon my death. If something is not in the Trust at the time of my death it is my desire that the asset go through probate as quickly as possible and be put into the Trust for my Trustee to distribute.

How do I avoid probate with my bank account?

There are a few ways to bypass probate as it pertains to bank accounts. Let’s take a look at them here.

Option 1: Retitle the account in the name of the Trust.

You can contact your banking institution and ask them to move the ownership of the account from you personally to you as the Trustee of your Trust. So instead of the account owner being “Jane Smith” it is now “Jane Smith, Trustee of the Jane Smith Revocable Living Trust”. 

To do this, you will need to contact your bank directly and see what specific paperwork they require. Typically, you will need to provide a copy of the Certificate of Trust and then complete any internal paperwork they require.

Thereafter you’ll notice that your account statements will show that you, the Trustee of the Trust, are the account owner. You likely will need to update your checks to reflect this as well. 

Nothing will change as it pertains to your use of the account. You’re still the Trustee of the Trust, and the Trustee has access to this account. But the key benefit is that if you become incapacitated or if you pass away, there is no lapse in ownership because your successor Trustee is named within the Trust and can begin acting in your stead.

Option 2: Name the Trust as Payable on Death (POD) beneficiary

Another option is to name your Trust as the payable on death beneficiary. This allows you to keep the account in your name as an individual. The Trust generally receives the funds only after your death. While this is simpler to set up, as some institutions can handle this online or over the phone and it doesn’t require retitling, it doesn’t have the same benefits.

When you set up your Trust as the POD beneficiary the Trust only gets the funds after death. There is no incapacity protection. But if you have a simple estate with incapacity planning already handled through Powers of Attorney, this may not be an issue or a drawback. However, if you want your successor Trustee to have access to these funds if you become incapacitated, naming your Trust as a POD beneficiary is not enough.

Option 3: Name a person directly as POD beneficiary

The last way to skip probate on your bank account is by naming an individual as a POD beneficiary. This option can be appropriate for a simple estate, but it provides less control and flexibility than having the account owned by a Trust. It can make sense when your POD beneficiaries are adult children, and your estate is simple enough that Trust-level control isn’t needed for the account.

Keep in mind that you can run into major problems if your beneficiaries are minor children. When a minor is the beneficiary, the funds generally cannot simply be paid directly to the child. Court involvement or another legally authorized arrangement may be required to receive and manage the funds for the minor. Other problems arise when the POD designations are outdated, and a beneficiary has predeceased you.  You can also run into problems when beneficiary designations are outdated or do not account for what happens if a beneficiary predeceases you. The result may not match your overall estate plan.

Should you put ALL your bank accounts in the Trust?

A Trust is almost always the best way to ensure that your bank accounts are distributed in the way you truly want them to be. A properly funded Trust can help your family avoid or minimize probate, provide continuity during incapacity, and give you greater control over how assets are managed and distributed. You can also ensure that proper safeguards are put in place.

When is it best to leave a bank account out of the Trust?

While a Trust can ensure the most control, sometimes it’s not necessary. For instance, an operating account for your daily expenses can stay outside the Trust with a POD designation if retitling creates logistical friction.

• Business accounts: it’s always best to keep your business assets separate from personal assets. This makes taxes easier. Business accounts should generally remain in the name of the business entity rather than being retitled into your personal Trust. Instead, your estate plan should address ownership of the business itself—for example, your membership interest in an LLC or shares of a corporation. Business owners should coordinate their business documents and estate plan to ensure continuity in the event of death or incapacity.
• Joint accounts: If you hold an account jointly with a right of survivorship, the funds generally pass to the surviving account owner outside of your probate estate. This means that the Trust won’t receive it at the first death regardless. Instead, you need to jointly consider what happens at the second death and how the remaining assets should be distributed to beneficiaries.

Why not put my checking account in a Trust?

Many people fear that if they move their checking account out of their personal ownership and instead into the ownership of their Trust, they are giving up control. But if you have a Revocable Living Trust and you are the Trustee of the Trust, you retain control of everything within that Trust until you become incapacitated or die.

Putting your checking account into a Trust is a great way to make sure it is available to benefit you and your Trust, even if you are unable to make financial decisions yourself. Your successor Trustee has immediate access to the account and can pay your bills for you without any issues.

Do I need a Trust if I have beneficiaries for all my accounts?

If your estate is simple and you have beneficiary designations on all accounts and life insurance policies, as well as a ladybird, survivorship deed, or other survivorship arrangements on any real estate, you may be fine without a Trust. But keep in mind, any asset you own from your furniture to your underwear will have to go through probate without one. Probate requirements depend on how the assets are owned and the circumstances of the estate.

What should be my estate planning goal for my bank accounts?

In most cases, your goals should be to have no account going through probate. So, this means if an account is in your name alone, you need to have a POD designation that bypasses probate, or you need to retitle the account to be owned by your Trust.

How do I actually retitle my bank account to my Trust or set up POD designation?

Here are a few easy steps to retitle your bank accounts:

1. For Trust ownership: Gather your Trust document or Trust certification;
2. Contact your bank and ask what else is needed; most have a process for this, some require an in-person visit;
3. If necessary schedule an appointment to process your request to change the account to Trust ownership; bring the Trust certificate and any other documents they require;
4. For POD designation: request a beneficiary designation form; designate the Trust as beneficiary with its full legal name and date
5. Repeat for each account

FAQs

What bank accounts should be in a Trust?

Any account that does not have a POD beneficiary should be in a Trust. And in many cases it may be best to name the Trust as the POD beneficiary. The difference is that if the Trust owns the account then there is a seamless transition between you as Trustee and your successor. They have immediate access during your incapacity or at your death. Whereas if your Trust is the POD beneficiary your Trustee will have to provide proof of death to the banking institution and then wait for them to pay the account into the Trust. At that point the successor Trustee may need to open a new bank account to put these funds into. 

What accounts should not be in a Trust?

Accounts that are jointly owned with the right of survivorship will pass directly to the co-owner regardless of what the POD designation says. So, if your joint owner and you agree that the funds should be a part of the Trust at the death of the first of you,  you may need to retitle the account to be owned by the Trust, depending on your estate-planning objectives and the terms of the account. If not, there is no reason to retitle the account.

What is the downside of having a bank account in a Trust?

If your Trust is revocable and properly done, there aren’t any downsides!

Who controls the bank account of a Trust?

The Trustee of the Trust. During your lifetime this is usually you. But upon your death your successor Trustee will control the bank accounts titled to the Trust. They will use the Trust agreement as their guide for how to distribute funds.

Should I put bank accounts in a revocable Trust?

If your Trust was created by a reputable attorney and is legal, there is no reason not to!

Is it smart to put all of my bank accounts in a Trust?

When you work with my team to set up a Trust, we look at all of your accounts and your estate as a whole. We can help you determine if every account should be in the Trust or if some should remain outside the Trust. In some cases, such as business owners, it may be wise to create a separate Trust for the business and business accounts. It is dependent on your unique situation and we would love to help guide you to the right choice for you!

Ready to ensure your bank accounts are fully protected and seamlessly integrated into your estate plan? Schedule a strategy session with our team today to find the right approach for your unique situation and protect your family from probate hassle.