Q: Can an Account Be Put Into a Trust, LLC, or Other Entity?
A: It depends on what the customer means.
WBA has recently begun receiving questions as to whether a customer can put their accounts into an entity such as a trust or LLC. In most instances, this involves a situation where the customer has received advice from a third party. The customer has been told by a third party to put an account into an entity. The customer then approaches the bank with this request but is unable to provide further instruction on how to accomplish the task. An example would be a customer who asks to put their LLC account into their trust. Whether that is possible depends on what the customer means by “put into.”
As far as WBA is aware, there is currently no statutory mechanism by which “put into” has any legal significance. Meaning, when a customer asks to put an account into an entity, there is no law that governs what should occur. Thus, the customer will need to provide more information as to what they mean. For example, in the above example, the customer has asked to “put their LLC account into a trust.” The possibilities as to what this might mean are numerous. The customer might mean:
- The trust is now a member/manager of the LLC, or
- The trust is now an owner of the LLC, or
- The LLC is a trustee of the trust, or
- The LLC is a beneficiary of the trust, or
- Any number of other possibilities.
The above possibilities may have bearing on the customer’s relationship with the bank. Without knowing which, if any, possibilities are true, the bank cannot know how the relationship is affected. When a customer asks to put an account into an entity, the bank will likely want to have a follow-up conversation with the customer. Depending on how well the customer understands what they intend to do, they may be able to explain and provide relevant documentation to support their request. If not, they may need to return to the third party who gave them the advice and ask for instruction on what is meant by “put in.”
Note: The above information is not intended to provide legal advice; rather, it is intended to provide general information about banking issues. Consult your institution's attorney for special legal advice or assistance.