Pro & Cons of a Trust Bank Account


When you start the estate planning process, you may want to open a bank account with some cash that can transfer to a beneficiary upon your death. You can open this type of account with most banks and the process is typically like setting up a regular deposit bank account.

Simple Setup

One of the benefits of a trust bank account is that it is simple to set up. You do not have to create any advanced legal documents or pay a lawyer to help you with this process. Instead, you can simply go to your local bank and open an account. You can name a trustee for the account and a beneficiary if you choose. Then when you die, the money will transfer to your beneficiary.

Avoid Probate

Another advantage of using a trust bank account is that your beneficiaries can avoid probate when you die. With this type of account, as soon as you pass away, the money can be transferred without having to go through probate. Since the probate process can take several months to complete, this will give your beneficiaries access to the money much quicker. You also do not have to worry about it going to creditors or to anyone else. The money will go straight to the beneficiaries that you designate in advance.

Limit to Protection

One of the potential issues with a trust bank account is that it may not be suitable for very large deposits. This is because of the lack of protection for large account balances. Trust accounts are insured by the Federal Deposit Insurance Corporation or FDIC in the same way that regular bank accounts are. For each beneficiary for your account, they can receive up to $250,000 in FDIC protection. This means that if the bank goes under, your beneficiary will receive a maximum of $250,000.

Estate Tax Concerns

One of the potential drawbacks of using a trust bank account is that it still counts towards your estate when calculating estate taxes. The estate tax is charged if the total value of your estate is larger than an exemption. As of the time of publication, the exemption is $1 million. Your account will be added to everything else you own when you die to determine if your beneficiaries have to pay estate taxes. By comparison, if you were to use an irrevocable trust to hold the assets, they could be removed from your estate and would not count towards the total.

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