As we have discussed, there are four different types of multi-party accounts that must be considered as a component of an estate plan. The types of accounts are: 1) joint account, 2) agency/convenience, 3) payable on death, and 4) trust.
The trust account is held in the name of at least one party, as trustee. The trustee holds the funds for the benefit of others, the beneficiary or the beneficiaries. The type of account and the deposit agreement with the bank determines the type of account. There is no formal trust, and the only “trust” property is the amount in the account. Trust accounts are also known as “Totten trusts,” “savings account trusts,” and “tentative trusts.”
Even though the trustee holds the funds for the beneficiaries, the trustee has the right to withdraw all funds from the account and even to close the account, all of which without notice to the beneficiaries. The beneficiaries have no right to the funds during the trustee’s life, unless the trustee and beneficiary have agreed otherwise.
Once all trustees are no longer living, the funds in the account are divided among the living beneficiaries. If two or more beneficiaries are living when the last surviving trustee passes away, the beneficiaries do not have a right of survivorship among themselves unless the account is specifically designated to have that right.
If all beneficiaries pass away before the trustees, unless the bank has written notice that the beneficiary had an interest in the account that does not require the beneficiary to survive the trustee, the funds in the bank belong to the estate of the last surviving trustee.