Taxation & Estate Planning

Trust Funding and Big Banks

By Joel A. Schoenmeyer

As I've said before, once a client executes a living trust, additional steps have to be taken to avoid probate. Usually, these steps involve changing ownership and beneficiary designations for the client's property, so that the living trust is the owner or beneficiary upon the client's death.

From a practice perspective, it's always difficult for attorneys for figure out how to handle trust funding. It's not really legal work, and the client can do it with guidance from the attorney. If the attorney charges for it, the cost may be prohibitive. If the attorney doesn't, he may spend a ton of time working for free. (Early on in my career as a solo, I actually did the transfers for free. I had to change that approach when one of my clients turned over something like 23 accounts (and stock certificates in 10 companies) for transfer. Wow -- did that take a lot of time!)

Now my approach is to give the client a letter, detailing how he or she would re-title or change the beneficiary on any property owned by the client now or in the future (CD's, money market, 401k, real estate, etc.). In addition to this letter, I handle the transfer of the client's real estate as part of the fixed fee I charge for estate planning. For a single person, this is usually a transfer from the client individually to the client as trustee of his or her trust. For a married couple, there are usually two deeds involved: one deed from husband and wife to wife as trustee of her trust, and one deed from husband and wife to husband as trustee of his trust. (Each deed conveys a one-half interest in the real estate.)

I also have tried in the past to offer a reasonable amount of assistance to my clients who are taking care of the funding (15-30 minutes?). I do this without charging an additional fee because I think that's fair. Or at least I did think that's fair. But two weeks ago a client of mine contacted me, and the fallout from that situation has made me re-think how I do business.

The client went to Chase Bank to change the names on his accounts, from him individually to him as trustee of his new living trust. The retail bankers told him:

1. That the trust was defective because the word "grantor" wasn't shown on the signature page, and would have to be re-drafted. (Note that there is no Illinois law, or ANY law that I am aware of, requiring the use of the word "grantor.")

2. That the attorneys for Chase Bank would not speak directly to my client or to me. Nor could I write them a letter to resolve the issue. Instead, I would have to work with the retail bankers as a go-between. Keep in mind that Chase's retail bankers tend to (a) be just out of college, (b) know nothing about legal matters, and (c) get very skittish if they have to do something "out of the ordinary." The best retail bankers get promoted; the others, um, don't.

Two weeks (and at least two hours of my time) later, and this issue has still not been resolved. Very frustrating for me AND of course for my client, and totally unacceptable. As a result, I will now:

-advise all of my clients not to use Chase Bank (or, if they use Chase Bank, to switch to somewhere else, like I did a few years ago -- CBOPRF is great!); and

-have to charge my clients my regular hourly rate ($250) if I must work with Chase Bank on trust funding issues.

It's really a shame. I know some attorneys at J.P. Morgan who are really excellent (and who have even tried to help me with the above situation). But the people on the ground -- the ones ordinary folks would need to work with every day -- are a nightmare.

Full post as published by Death and Taxes Blog on April 13, 2010 (boomark / email).