Irrevocable Trust - EFT to Trustee's Bank Account

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ctraveler
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Irrevocable Trust - EFT to Trustee's Bank Account

Post by ctraveler »

I am the trustee and the sole beneficiary of my mother's Irrevocable trust and I was wondering how other trustees handle taking money out of the trust?

I don't currently need to take money out of the trust but I just set up a Fidelity brokerage account for the trust where I am planning to put the proceeds from selling my mother's house and any other $ that need to go into the trust. I was going to add both my checking account (joint with my wife and my mothers checking account as authorized EFT accounts. My mothers would just be for transferring $ into the trust and mine would be for transferring $ out of the trust if I ever need to pay for assisted living/other care for my mother. The attorney that set up the trust instructed me to never pay for my mother's care directly from the trust but to instead withdraw/transfer $ from the trust to my account and then for me to write a check from my account to pay my mother expenses if necessary.

I just dawned on me that my checking account being joint with my wife might be an issue but I'm not sure if it really matters.

How do any other trustees of irrevocable trusts have things set up or handle withdrawals from the trust?
afan
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Re: Irrevocable Trust - EFT to Trustee's Bank Account

Post by afan »

I suspect the answer will depend on why you cannot simply write checks from the trust to pay your mother's bills.

Is this a special needs trust? Is it designed to get around the Medicaid asset limitations?
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FIREchief
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Re: Irrevocable Trust - EFT to Trustee's Bank Account

Post by FIREchief »

afan wrote: Fri Sep 15, 2017 5:11 pm I suspect the answer will depend on why you cannot simply write checks from the trust to pay your mother's bills.

Is this a special needs trust? Is it designed to get around the Medicaid asset limitations?
I believe that if he/she were to distribute trust assets for the benefit of anybody who is not a beneficiary of the trust, he/she would be breaching his/her fiduciary responsibility as trustee. It would likely be a "nobody cares" situation, unless a successor beneficiary were to challenge his/her actions.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
NotWhoYouThink
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Re: Irrevocable Trust - EFT to Trustee's Bank Account

Post by NotWhoYouThink »

The attorney that set up the trust instructed me to never pay for my mother's care directly from the trust but to instead withdraw/transfer $ from the trust to my account and then for me to write a check from my account to pay my mother expenses if necessary.
Ummm...this looks problematic. Presumably the reason your mom gave the money to the trust is to make it unavailable to be spent on her care, making her eligible for government services. If you are spending it on her care, the state may have some opinions on whether or not she is eligible for government services. Laundering it through your checking account may help avoid detection, but will not comply with eligibility requirements.
samsmith
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Re: Irrevocable Trust - EFT to Trustee's Bank Account

Post by samsmith »

Not sure this plan would work. First, in my experience, in order to do an Electronic Funds Transfer the two accounts should have similar owners. In this case, the trust account would not be similar to the joint account - so I am not sure the banks or Fidelity would allow this.

In any event, the OP is the trustee-beneficiary of the irrevocable trust. His mom is not a beneficiary, so that is why I expect the lawyer explained that trust funds should not directly be used to pay his mom's defense. I would suggest that he get check-writing privileges on the Fidelity account. If he wants to make a distribution, he could write a check to himself and deposit that check into his own checking account. I think he could of course decide to pay some of his mother's expenses from that same checking account, but these really should be two separate unrelated transactions.

As for putting money into the trust account, I think that really should be done by his mom - assuming she is grantor of the trust. Similarly, I think writing a check would be better than trying to EFT transfers.
NotWhoYouThink
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Re: Irrevocable Trust - EFT to Trustee's Bank Account

Post by NotWhoYouThink »

Vanguard did allow me to set up EFT between my checking account, which is joint with my spouse, and my trust account, of which I am the sole beneficiary.
samsmith
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Re: Irrevocable Trust - EFT to Trustee's Bank Account

Post by samsmith »

I think I should also add that FIREchief's signature also applies to any advice i give. Namely: I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
dbr
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Re: Irrevocable Trust - EFT to Trustee's Bank Account

Post by dbr »

I was a beneficiary of a trust. The trustee simply transferred funds into a checking account which was in fact a joint checking account with someone else. The trustee company was the Private Client Group of a bank. My checking account was with the same bank.
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FIREchief
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Re: Irrevocable Trust - EFT to Trustee's Bank Account

Post by FIREchief »

NotWhoYouThink wrote: Fri Sep 15, 2017 6:32 pm
The attorney that set up the trust instructed me to never pay for my mother's care directly from the trust but to instead withdraw/transfer $ from the trust to my account and then for me to write a check from my account to pay my mother expenses if necessary.
Ummm...this looks problematic. Presumably the reason your mom gave the money to the trust is to make it unavailable to be spent on her care, making her eligible for government services. If you are spending it on her care, the state may have some opinions on whether or not she is eligible for government services. Laundering it through your checking account may help avoid detection, but will not comply with eligibility requirements.
While it may look like a duck, sound like a duck and walk like a duck; I don't think this could be considered to be illegal laundering. As long as the irrevocable trust was funded prior to any look back periods, it may very well comply with all applicable laws. The fact that the current beneficiary decides to gift some of his assets (whether "traceable" to a trust distribution or not) to his mother instead of taking an extended vacation is entirely up to him. With respect to the trust distributions, there are certainly many methods for the trustee to remove funds from the trust's account(s) and to transfer them to the beneficiary.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
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FIREchief
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Re: Irrevocable Trust - EFT to Trustee's Bank Account

Post by FIREchief »

samsmith wrote: Fri Sep 15, 2017 6:40 pm I think I should also add that FIREchief's signature also applies to any advice i give. Namely: I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
LOL. Feel free to plagiarize as desired (this goes for all Bogleheads!) 8-)
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
Afull
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Re: Irrevocable Trust - EFT to Trustee's Bank Account

Post by Afull »

To OP, I have same situation at Fidelity except I have a co Trustee and multiple beneficiaries.

We are in the process of distributing to the beneficiaries and paying bills. In most cases I do this with Fidelity BillPay. One beneficiary has a Fidelity acct and I do a transfer directly to their acct. For transfer amounts under $25k it's simply a phone call and larger amounts it's in writing via fax or their secure web. For myself I can transfer online, both accts have to have my SS for me to do this onine. It's been very painless.

I also have a pad of checks, but have not used those so far.

About medical expenses I'm not aware of any concerns, on the other hand Mom had excellent insurance.

You should talk to a Fidelity rep.
Topic Author
ctraveler
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Re: Irrevocable Trust - EFT to Trustee's Bank Account

Post by ctraveler »

Thanks for the information and suggestions. I'm not actually planning on taking any $ out of the Trust at this time, probabally not for years in the future I'm still in the process of finding the Trust Brokerage. I was just trying to set things up the easiest and correct way for both funding and future distributions. For my personal banking I write very few checks and mainly handle everything via bill pay and transfers so I automatically gravatiated toward EFT for funding and future distributions. The fidelity bill pay was a good idea that I hadn't thought of.
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