As an estate planning and elder law attorney, I often advise clients about how their assets, including their bank accounts, should be titled.  Many times clients are advised to retitle their accounts into the name of their Trust.  Sometimes I advise clients that accounts should be titled in one name only.  There are reasons for my advice and these reasons are unique to that particular client’s situation.  It is alarming to me how often clients come back after I have advised them to retitle their accounts and they say, “the bank teller told me to do something different so that’s what I did.”    How you hold title to your assets, including bank accounts, has important implications for who will be able to manage those accounts for you in the event of your incapacity and how those assets will be distributed after your death, so it is vital to follow your lawyer’s advice (and nobody else’s) regarding these matters.  This goes for other matters involving your estate plan, even when  your bank is also involved.

Here are five situations where banking and estate planning often intersect, and what to be aware of.

1. The bank insists it needs a complete copy of your Trust in order to open an account in the name of your Trust.   The Massachusetts Uniform Trust Code (MUTC) includes a provision specifically allowing an individual to provide a financial institution such as a bank or brokerage house with a Certification of Trust form in lieu of providing a copy of the entire Trust instrument. (For all you fact-checkers out there, this can be found at G.L.c.203E§1013.) Estate planning attorneys fought hard for the enactment of this provision because privacy is one of the primary reasons people create a Trust; they don’t want anyone else to read their private estate plan.  Yet, clients often call me to say their bank insists on having a copy of their entire Trust document in order to open a Trust account.  This is a requirement that is not in line with current law.  In fact, the statute includes a provision allowing a court to impose damages on anyone who demands a copy of the Trust document after being provided with a Certification.  If you encounter this issue, print out a copy of the statute and take it to your bankers to educate them about the law.

2. The bank tells you it needs a copy of your deceased mother’s Power of Attorney in order for you to access her account. It is astounding to me how often a child of a deceased client will call to say the bank is requesting the parent’s Power of Attorney so that the child can gain access to the parent’s account.  A Durable Power of Attorney is a very important estate plan document that allows the maker (the principal) to appoint someone (the attorney-in-fact) to act on the maker’s behalf to pay bills, make decisions about investments, file income tax returns, etc.  However, the authority of the attorney-in-fact exists only during the lifetime of the principal.  When the principal dies, the Power of Attorney can no longer be used.

3. The banker requires that you provide a Taxpayer Identification Number for your Revocable Living Trust. A Revocable Living Trust is a very common estate planning tool.  It can be used to avoid probate, provide for ease of management in the event of the incapacity of the Trust maker, reduce estate taxes, and provide creditor protection for a child’s inheritance.   Most often, the person who creates the Trust names himself as the Trustee (manager) and is also the beneficiary (owner) of the Trust during his lifetime.  For income tax purposes, this means that all of the income earned on accounts titled in the name of the Trust is taxable to the Trust maker.  So long as the Trust maker is alive and serving as Trustee, all accounts opened in the name of the Trust should use the Social Security Number of the Trust maker.  No separate Taxpayer Identification Number (TIN) (sometimes called an Employer Identification Number (EIN)) is required for the Trust in that situation, and in fact, one should not be used.  A helpful guide from the IRS entitled “Understanding your EIN” explains in detail the circumstances under which a TIN or EIN is required.

4. The bank teller suggests you add someone else’s name to your account. Another common and quite frustrating situation that I hear all too often from clients or from the child of a client who has passed away, is that someone else’s name was added to the parent’s bank account at the suggestion of the bank teller.  As you might imagine this can cause all sorts of trouble.   First of all, how does the bank teller know that the child who has accompanied mom to the bank is trustworthy?  A joint owner on an account has the same right of access to the funds as does the original owner.  Also, there is a presumption under the law that when one joint owner dies, the account belongs entirely to the surviving joint owner – is that what mom intended?  What about the other children?  Further, for long-term care planning purposes it is sometimes vital that an account be owned in a particular way, and sometimes this is in a person’s individual name.  When the bank teller advises the customer to do something else, it can have serious and expensive consequences for a family.  Unlike lawyers, bankers do not (to my knowledge) carry malpractice insurance.  As such, the harm that results from following legal advice dispensed by a bank is often not compensable.

5. The banker offers to obtain a Taxpayer Identification Number for you. A TIN or EIN (as explained above) is required for a decedent’s estate or often for an irrevocable trust.  This number should be obtained for you by your accountant or your lawyer, not by the bank.  The problem that often arises when the banker decides to take on this task is that the estate or trust ends up with two TINs which results in a major headache with the IRS.  As Nancy Regan used to say in the 1980s war on drugs, “Just Say No’ if your bank teller offers to obtain a TIN for your Trust.

The important takeaway here is, if you have been advised by your attorney to open an account in a particular manner, do not let the bank teller (or financial advisor) persuade you to do otherwise.  If a bank employee advises you to do anything that may have an impact on your estate plan, check with your attorney first before following the banker’s advice.  It may be that the advice you are being given is not be appropriate for your situation, or worse — could disrupt your carefully crafted estate plan and cause complications and expenses for you and your family in the future.

Attorney Suzanne R. Sayward is certified as an Elder Law Attorney by the National Elder Law Foundation, a private organization whose standards for certification are not regulated by the Commonwealth of Massachusetts.  She is a partner with the Dedham firm of Samuel, Sayward & Baler LLC.  This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020.