To invest trust funds in stocks, bonds, and other securities, the trustee must open an investment trust account with a brokerage firm or other financial institution. If securities held in the name of the grantor are to be transferred into the trust, the trustee must open an investment trust account to hold such securities. When opening a trust account, the financial institution will have a set of forms that must be completed and signed. The trustee must also provide detailed information about the trust, all trustees, and the assets that will be used to fund the trust account.
List of Documents Required to Open an Investment Trust Account
To open a brokerage account or other investment account to hold trust assets, you may need to present the following items:
1. The original trust agreement or restated trust agreement, if the trust has been amended or modified.
2. A certification of trust or abstract of trust.
3. All pages of the most recent account statement from any financial institution where assets being used to fund the trust account are currently held.
4. Physical stock certificates for securities that will be used to fund the trust account, if physical stock certificates were issued for such securities.
5. Government issued identification, such as a driver’s license, for all trustees listed on the account. Foreign citizens typically must present additional forms of identification.
6. Trust account application forms signed by all original trustees, co-trustees or successor trustees, as applicable. Some firms require trustee signatures to be notarized or have a signature guarantee before the account will be opened.
7. If the trust is a testamentary trust, the last will and testament, along with any codicils, may be required.
8. If the grantor or original trustee is deceased, a certified copy of the death certificate may be required.
If you plan to go to the bank or brokerage firm to open the investment trust account, call an account representative in advance for a list of documents and information you need to bring. It can be very frustrating to arrange an appointment to open a trust account only to find you have to come back again with additional paperwork.
Tax Considerations
Investments in a trust account may generate taxable income and capital gains. Before making decisions about how to invest in a trust account, consider the tax ramifications and how the trust will pay taxes that may be owed. A CPA or tax professional can advise on suitable investments for the trust, such as tax exempt securities and other options for minimizing tax liabilities, depending on the specific type of trust and restrictions in the trust document.
Trust Restrictions on Investments
Before opening a trust account, the trustee should review the trust agreement thoroughly to determine if there are restrictions on the types of assets in which the trust may invest. If any of the trust language is unclear or the trustee is unsure whether making a particular type of investment is permissible, consult an attorney.
Trust Administration Guide
To view our free guide on trust administration, which includes free forms, checklists, and tips for first time trustees, see administer a trust.
Information Required to Open an Investment Trust Account
The type of information required to open an investment trust account varies by financial institution. If possible, download a copy of the trust account application from the firm’s website to learn what you will need to open the account before you go to the bank or brokerage firm. Read the instructions on all trust account application forms thoroughly.
The following information is typically required to open an investment account for a trust:
1. The full legal name of the trust.
2. The full legal name and address of each trustee that will be listed on the account, including all co-trustees and successor trustees.
3. The tax identification number or social security number used for reporting trust income.
4. The exact date on which the trust was created.
5. The full legal name of all current beneficiaries of the trust.
6. How trust assets will be invested. When opening a trust account, the trustee should be prepared to provide information about the investment objectives for the account. This includes information about the type of securities the trustee plans to invest in as well as whether the trustee’s risk tolerance for the account is aggressive or conservative.
Consult an estate planning attorney about the duties of a trustee regarding management of trust property in advance. Rather than relying on advice from a financial adviser employed by the financial institution where you open the account, obtain guidance from an independent, unbiased financial planner when making decisions regarding trust investments. See also The Trustee's Legal Companion: A Step-by-Step Guide to Administering a Living Trust.
How to Title the Trust Account
A trustee should avoid taking title to trust property in his own name as an individual. Title to trust property should be held as trustee of the trust. The designation of trustee should be stated clearly on any account that holds trust assets. For example, Scott and Mary Hibbert, Trustees of the Scott and Mary Hibbert Living Trust. Refer to the certificate of trust or the trust agreement for the full legal name of the trust and information on how to hold title.
Failure to correctly title trust assets can cause a myriad of problems. For example, if the trustee puts trust assets in an investment account titled in his own name as an individual, rather than as trustee, he will be deemed the legal owner of such assets and subject to taxes thereon. Holding title to trust property in a manner other than as specified in the trust agreement can also subject the trustee to personal liability and penalties for violation of applicable laws. See Books for Trustees.
If You Are In Over Your Head
If you were named trustee of a trust with substantial assets and feel overwhelmed, you are not alone. Trust administration and management of trust property is burdensome and complicated for most people, unless they work in the financial services industry. Rather than risk a loss of assets and incur liabilities that could place your own financial security at risk, talk with a professional. Depending on the size of the trust and the type of administration required, it may be beneficial to work with a trust company that specializes in investment of trust property. See Trust Companies for more information.
.