Trust-Accounts in Law of Succession
This contribution is aimed at heirs who wish to access bank assets managed in a trust. In the USA, it is common practice in wealth planning to manage one's assets in a trust. We have already explained what a trust is and how it is treated in Germany in a separate article.
trusts are often set up during one's lifetime and bank assets are transferred to the trust. This is called inter-vivos trust or living trust. In addition, there is the design of the establishment of a totten trust. This is characterized by the fact that the bank is instructed to automatically pay out the existing bank assets to a beneficiary in case of death. The creator of the trust has the power of disposal over the assets until his death and can revoke the trust. In banking, such accounts are called POD (Payable-on-Death) accounts.
Which law applies to the trust?
In the USA most states have their own trust law. For example, the law of the State of Tennessee is in Tenn. Code Ann. § Section 35. The legal sources for all states can be found on the website linked here. Many of the state laws are based on the Uniform Trust Code (UTC). This is an attempt to standardize state rights and create a model law. The UTC has so far been adopted by 35 states.
Does a trust have to be registered?
Whether a trust must be registered depends on the federal regulations. Generally speaking, trusts are set up to distribute assets anonymously, bypassing the state procedure. Therefore, only a few states provide for registration at all. These include:
- Nebraska and
- North Dakota.
It should be noted, however, that even in some of these states, registration is by no means mandatory. Thus, it is the responsibility of the trustee to keep the trust deed (deed). This is the mirror image of private asset management - if a person decides to distribute his assets without government assistance, he alone is responsible for it. Access to an official register is at best associated with little chance of success. If the trustee dies, the successor trustee should know where the original deed is located. Digital copies on the computer are not valid documents.
What is a trust-account?
A trust account is used by the trustee to manage the assets according to the terms of the trust deed. Such an account does not differ in function from the usual accounts. Payments can be processed through it. The big difference is that the account is not in the name of a natural person or a company. Instead, it is set up in the name of the trust itself. Only the trustee is authorized to close a trust account. The necessary documents must be brought along for the dissolution. These are usually an identity card and the same documents that the trustee has received for opening the account. In many cases, the bank will have made a copy of the trust deed - but it does not hurt to make a copy of it as well. Exactly which documents are required can also be found in the bank's conditions for closing the account.
Payment of a living trust in the event of death
The trustee is responsible for the management of the assets. The bank cannot pay out the assets to the beneficiaries on its own authority. If the settlor of the trust was also the trustee, his role passes to the heirs. A new trustee can be appointed from among them (Successor Trustee). If the bank does not have a trust deed, it will want to regularly check the orders of the settlor before paying out. It is possible that a successor trustee has already been appointed in the trust deed, so it is not allowed to deviate from this. This person must then submit the above documents to close the account.
Payment of a totten trust in the event of death
As already written above, the settlor of a totten trust has control over the assets until his death and can revoke the trust. In banking, such accounts are called POD (Payable-on-Death) accounts. In case of death, the assets are automatically paid out to the designated beneficiary. The name of the account often indicates whether it is a totten trust. Common phrases are for example: "payable on death to," "in trust for," or "as trustee for,".
If there is a presumption of being a beneficiary of a totten trust, the potential beneficiary must report to the relevant bank with the death certificate of the settlor and his own identification.