Losing a loved one is overwhelming, and dealing with financial matters can make it even more stressful. If your parent or relative had a bank account titled in their revocable living trust, you may be wondering what happens next. Can you access the funds? Will the bank freeze the account? How do you pay bills while waiting for everything to be settled? These are common questions, and in this blog, we'll break it down in simple terms.

Understanding Trust-Owned Bank Accounts

A trust-owned bank account is different from a personal account. "When a person sets up a living trust, they often transfer ownership of their assets—including bank accounts—into the trust's name. To understand the benefits of a living trust over a will, you can refer to our article on Benefits of a Living Trust Over a Will for Aliso Viejo and Orange County, California Residents.

"Unlike personal bank accounts, which can get frozen upon a person's death, trust-owned accounts follow a different process. If handled correctly, this can allow for a smooth transition of assets without getting stuck in probate court.

What Happens to a Trust-Owned Bank Account When the Owner Dies?

When the grantor of a trust passes away, the successor trustee has the legal right to take over management of the bank account. "However, banks have their own policies and may still require certain steps before granting access. For more insights on how creditors can seek payment from a deceased person's estate, see our post on How Creditors Can Seek Payment from a Deceased Person's Estate in California."

Here's what usually happens:

1. The Bank is Not Automatically Notified
• Banks do not immediately know when an account holder dies. Unlike government agencies such as Social Security, banks do not receive automatic notifications.
• The successor trustee or an authorized representative must inform the bank and provide the necessary documentation.

2. The Bank May Temporarily Restrict the Account
• Even though trust accounts do not typically go through probate, some banks may freeze them temporarily until they verify the trustee's authority.
• To unfreeze the account, the successor trustee must provide specific paperwork.

3. Documents Required to Gain Control of the Trust Account
• A certified death certificate of the grantor.
• A copy of the trust agreement showing the trustee's authority.
• An EIN (Employer Identification Number) for the trust, since it becomes a separate tax entity after the grantor's death.
• The trustee's valid identification (ID, driver's license, or passport).
• A completed bank form confirming the new trustee's authority.

Each bank may have slightly different requirements, so it's a good idea to call ahead and ask what they need to avoid delays.

What If the Bank Freezes the Account Longer Than Expected?

Sometimes banks take longer than expected to grant access to the trust's funds, leaving the successor trustee in a difficult position when it comes to paying bills. Here's what you can do:

✅ Use a Joint Account (if one existed): If the deceased had a joint account with the trustee or a family member, that person can continue to use it for expenses.

✅ Reimburse Yourself Later: If necessary, the trustee can pay bills personally and then reimburse themselves once they have control over the trust account. Just be sure to keep all receipts and document the payments to avoid disputes.

✅ Contact the Bank Manager: If the delay is unreasonable, visit the bank in person and speak with a manager. Provide all required documents and request an expedited review.

✅ Legal Action if Necessary: Under California Probate Code § 17200, a trustee can petition the court to order the bank to release funds if the delay becomes excessive.

Can a Successor Trustee Write Checks and Pay Bills Right Away?

One of the biggest concerns is paying bills, such as the mortgage, utilities, or funeral expenses, after the grantor passes. Can the successor trustee write checks immediately?

✅ If the account was in the trust's name before death:

• The successor trustee should be able to access funds once they provide the proper documents.
• They can write checks, pay bills, and manage expenses directly from the trust account.

🚫 If the account was in the grantor's personal name:

• The bank will freeze the account upon learning of the death.
• The funds will be subject to probate, unless the account had a Payable-on-Death (POD) beneficiary.
• The trustee will need to open a new trust administration account to handle expenses.

What Should the Trust Owner Do in Advance to Avoid Issues?

For elderly individuals who want to prevent banking access issues, here are proactive steps to take:

✅ Add a Co-Trustee: Having a co-trustee allows a second person to manage the trust's finances while the grantor is alive. Upon the grantor's death, the co-trustee automatically retains control.

✅ Keep a Small Emergency Fund: Maintain a separate personal account or joint checking account with a family member to cover immediate post-death expenses while waiting for trust account access.

✅ Pre-Authorize Bank Access: Some banks allow customers to pre-authorize successor trustees on trust accounts, making access smoother upon death.

✅ Review and Update the Trust Regularly: "Ensure the trust documents are current, and the successor trustee has all necessary information to act quickly when the time comes. Regular updates can prevent complications, as discussed in our article on Why an Estate Plan Maintenance Plan is a Smart Investment to Control Your Legal Costs and Protect Your Future."

How Long Does It Take to Open a New Trust Bank Account?

If the trust does not already have an account, the successor trustee will need to open a new trust administration account using the trust's EIN (since the grantor's Social Security Number can no longer be used). Here's the timeline:

📅 Apply for an EIN: Same-day if done online through the IRS, or 1–2 weeks by mail. 📅 Bank Processing Time: Varies, but expect 3–10 business days after providing documents. 📅 Total Time: Around 1–3 weeks, depending on the bank.

Final Thoughts: Planning Ahead is Key

Handling a trust-owned bank account after death doesn't have to be a nightmare. By planning ahead, you can ensure a smooth transition and avoid financial disruptions. Here's how:

✅ Make sure bank accounts are titled in the trust's name. ✅ Keep trust documents and an updated successor trustee list. ✅ Designate POD beneficiaries for non-trust accounts. ✅ Consult an attorney to avoid mistakes that could delay access to funds.

Steps to Transition a Trust Bank Account After the Trustor's Death

1️⃣ Obtain an EIN (Employer Identification Number) for the Trust

• The deceased's Social Security Number (SSN) can no longer be used for trust accounts.
• The successor trustee must apply for a new EIN through the IRS (online or via Form SS-4).

2️⃣ Open a New Trust Administration Account

• The old trust-owned bank account must be closed, and a new one must be opened under the trust's new EIN.
• The successor trustee will need:
  • Certified copy of the death certificate
  • Trust agreement (to prove authority as trustee)
  • New EIN from the IRS
  • Personal identification (driver's license, passport, etc.)

3️⃣ Transfer Funds from the Old Account to the New Account

• Once the new account is established, funds from the deceased's trust account are transferred into the new trust administration account for estate and beneficiary distributions.

4️⃣ Use the New Account to Pay Bills & Distribute Assets

• The successor trustee uses this new trust account to:
  • Pay the decedent's final bills (funeral, debts, taxes, etc.).
  • Manage trust expenses.
  • Distribute funds to beneficiaries according to the trust terms.

What Happens if You Don't Open a New Trust Account?

If the successor trustee fails to obtain a new EIN and open a trust administration account, banks will often refuse transactions, and using the deceased's SSN for banking or taxes could trigger legal and tax issues.

Need Help Managing a Trust or Estate? Call Us Today!

Dealing with estate matters can be confusing, but you don't have to do it alone. For expert guidance on trust administration and asset protection, call The Law Offices of James Burns at 📞 (949) 305-8642 or visit 🌐 www.jamesburnslaw.com.

Disclaimer: This blog provides general information and is not a substitute for legal advice. Every situation is different, and you should consult a qualified attorney for specific guidance regarding your trust and estate matters.