Hello. My name is Kyle Krasa and I’m an estate planning attorney in Pacific Grove, California. I’m certified by the state bar of California, as a legal specialist in estate planning trust and probate law. The purpose of this video is to give you general information about an important aspect of estate planning law so that you can be prepared when working with your own attorney. Watching this video does not establish an attorney client relationship. The law is far more complex and nuanced than can be explained in a few short minutes. As a result, before acting on any of the information contained in this video, you should consult a competent attorney who is licensed to practice law in your community. With that understanding, I hope you enjoy my video and you find it informative. Thank you.
A key aspect to a trust-based estate plan is trust funding. And that means you want to retitle your assets to the trust. So think of your trust as an empty basket and your assets as eggs – you need to put the eggs in the basket. If you leave the eggs outside of the basket, in other words if you don’t retitle your assets to the trust, then the trust will not work as effectively as you hope for. There are three key exceptions to this trust funding idea. Typically retirement plans, annuities and life insurance are often kept outside of the trust while you’re living, but generally speaking, most of your other assets should be placed into the trust. And that includes checking accounts, savings accounts, and taxable investment accounts like brokerage accounts. So it’s important to put those eggs in the basket.
Now, when it comes to accounts held at financial institutions, you need to contact each individual financial institution and work with that institution to get that egg in the basket, to retitle that asset to the trust. And what you want them to do is you want them to update their signature cards. So signature cards is really an outdated term of art, but the financial institutions still use this term. It used to be that they would actually keep physical cards on file that would have information about the owner, including the owner’s signature, so they can match the signature on file with a signature of someone who is transacting business at the bank to make sure that that really is the person who owns the account or is authorized to sign for the account. Now, signature cards are not physical cards anymore. They’re just screens on a computer, but the idea is the same. It’s the record that the financial institution has, that has the name of the owner and other critical information about the owner, including a sample of the owner signature.
So you want to update the signature cards from you as an individual to you as trustee of the trust. And when you work with the financial institutions to do that, the financial institutions are going want to have some key information about the trust on file. They’re going to want to understand certain aspects about the trust in order to update the signature cards to reflect that the trust is the owner. So what is the key information typically that the financial institutions want to have on file?
Number one, they want to of course know what the name of the trust is. So that makes sense. How are they going to title the asset to the trust if they don’t know what the name of the trust is?
Secondly, they want to know who the grantors of the trust or the trust makers, you know, who created the trust, who established the trust?
Third, they’re going to want to know who the trustees are. Who’s in charge of the trust, who has the power to withdraw funds, to rearrange assets, to write checks? And so on.
Number four, often the, financial institutions want to know whether the trust is revocable or irrevocable. So trust can either be revocable, meaning it’s easy for the Trustmaker or the grantor to change the trust, or they can be irrevocable which is harder for the grantor or for anyone else to change the trust. So that’s a key aspect.
Number five, the tax ID number of the trust. Now sometimes the tax ID number could be the grantor’s social security number, and sometimes the tax ID number is a separate number altogether for the trust. In any case, the financial institution wants to know what the tax ID number is.
And number six, typically the trustee’s powers. So what powers does a trustee have to transact and conduct business on behalf of the trust?
Now, one way to provide all this information to the financial institutions is simply give them a complete copy of the trust. But there are a couple of reasons why you might not want to do that.
Number one, privacy: a lot of clients don’t like the idea of passing copies of their trust all around town, especially because they might change their minds about the beneficiaries and some of the other more personal details that they have contained in the trust. A big reason why people do trust-based plans to begin with is for privacy purposes to stay out of court, stay out of probate so not everything is public. So for privacy reasons, handing out every financial institution, a copy of a trust might not be the best idea.
Secondly, it’s not really a favor to the financial institution to give them a complete copy of the trust because the poor bank employee is going to have to sift through 50, 60, 70, 80 pages of legal jargon just to answer these six questions. So instead it would be much easier instead of providing a complete copy of the trust is just to provide a document that contains this critical information. And that document is often referred to as a certificate of trust. And there are other terms for this document as well. Sometimes it can be referred to as a certification of trust or a trust certificate or a trust certification, a trustee certification, an affidavit of trust. It’s all the same idea. It’s statements about the trust facts, information about the trust that the financial institutions need to know. Nothing more, nothing less, just the basic facts that they need to know.
And most States authorize the ability to provide a financial institution with a certificate of trust in lieu of providing a complete copy of the trust. In fact, in California, our probate code section is 18100.5. So there’s a specific probate code section in California that says that you can provide a financial institution a certificate of trust in lieu of providing the entire trust. Furthermore section 18100.5 says that a third party can rely upon the information contained in the certificate of trust and will not be held liable as long as they’re acting in good faith and relying upon the information contained in the certificate of trust. So if in fact, the trust certificate of trust is not accurate about what the trust says, as long as the third party acted, as long as the financial institution acted in good faith, they’re not going to be held liable so they don’t need to see a complete copy of the trust. They do not need to see who the beneficiaries are specifically. There’s certain excerpts of the trust that a financial institution can require. And those excerpts center around the identity of the trustees and the trustee powers. So sometimes you’ll attach certain excerpts of the trust to the certificate of trust, but all the other provisions remain private.
Sometimes the certificate of trust is drafted by your attorney. Whenever I create an estate plan a with a trust I always include a certificate of trust and then any time the trustees change. So if there’s incapacity or the trustees pass away, and now we have new trustees, I’ll draft, a new certificate of trust to present to the financial institutions, to retitle the assets to the new trustees. Sometimes financial institutions have their own form certificate of trust that you would fill out.
But in any case, the certificate of trust is just a handy way to provide key information about your trust to the financial institutions, without having to overwhelm them with information they don’t need and without having to reveal and share, uh, the more personal aspects of your trust.
I hope you enjoyed watching my video. As I mentioned at the beginning, this is not intended to be a substitute for proper legal counsel. Before acting on any of the information contained in this video, you should consult a competent attorney who is licensed to practice law in your community. Thank you.