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Elderlaw: 07/01/2007

Trust: Checking Account vs. Money Market

Dear Len & Rosie,

We are having our trust updated and have had two different opinions on checking accounts and CD’s. Should we have our regular checking account in the trust? Should we have the money market account with Schwab in the trust? Should we have the CD in the trust?


Dear Frank,

As a general rule, you should retitle all of your assets into your trust, except for three things. First, don’t bother going to the DMV to transfer your vehicles into the trust. Chances are, you’ll dispose of all of your vehicles before your death anyway. If you die owning an automobile, your heirs can have it retitled in their names at the DMV forty days or more after your death. All they need is your death certificates, the vehicle’s title and registration, and DMV Form REG-5.

Second, unless your lawyer advises you to do otherwise, do not transfer any retirement account into your trust or name your trust as a retirement account beneficiary. Transferring a retirement account into a trust means you’re cashing in the account, and you’ll have to pay income tax on all of that money all at once. And in most cases, IRA’s, 401K’s and other retirement accounts paying into a trust have to be cashed out within five years of your death.

On the other hand, if you and your wife name one another as primary beneficiary of each of your retirement accounts, and you name your children or other chosen heirs as contingent beneficiaries, then your children will be able to cash in your retirement accounts over their own life expectancies, instead of cashing them in all at once or over a five year period. The only time you should seriously consider naming a trust as a retirement account beneficiary is if you have a minor or disabled child, or a spendthrift child who will spend a buck fifty for every dollar you hand them.

Finally, it’s usually a good idea to keep your day-to-day checking account outside of your trust. Instead, title the account in yours and your wife’s names, and add a trusted child on the account as either a joint tenant or just give the child signature authority on the account.

There’s a good reason for this. If you and your wife become incapacitated, the persons you named as successor trustees of your trust will take over and manage the trust and pay your bills. But that cannot happen overnight. To remove you as a trustee, it’s necessary for a physician, or sometimes two, to determine that you are incapable of managing your affairs, making decisions, and protecting yourself from undue influence. And after that happens, your successor trustees will have to sign legal documents prepared by your attorney and deliver them to the bank to be added to your accounts as trustees. That can take several weeks, so who’s going to pay your PG&E bill in the meantime? If you give someone you trust the ability to sign checks on your behalf, it will make things easier.

Len & Rosie

Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, by phone at (707) 996-4505, or on the Internet at Len also answers legal questions each weekday, Noon-12:45 p.m., and Sundays, 4-7 p.m. on KGO Radio 810 AM

Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, by phone at 996-4505, or on the Internet at Len also answers legal questions each weekday on The Len Tillem Show, a podcast available via iTunes, Facebook, and

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