We’ve had clients in the past run into a situation where the bank told them the following when they tried to open a trust checking account: “Your trust needs to be registered with [some government organization].” This may be a bank policy, but it is not law. It is also a very uncommon bank policy. Many bankers are more familiar with entities such as Corporations and LLCs. These entities are created by a State – usually a Secretary of State office or a Department of Corporations. Entities such as a Corporation or LLC are brought into existence upon the filing of a public record, usually Articles of Incorporation of Articles of Organization. Opening a bank account for an LLC or Corporation usually involves supplying the bank with this publicly filed document.
A trust, on the other hand, is a private instrument that is brought into existence by the involved parties signing the trust agreement. The trust agreement does not need to be filed with any government office or made into a public record for any reason. Trusts are not State granted privileges, but instruments granted by common law. Bank officers may not be educated or trained to understand the differences between a trust and a Corporation.
Bank policies vary from bank to bank; each bank can require any policy they like. The need to register a trust with any organization is not a legal requirement. I can tell you that, based on feedback from other clients, Bank of America is one of the most inconsistent banks to deal with.
We’ve even had one client who was told by Bank of America that they simply do not offer trust checking accounts. The client then drove 3 miles to the another Bank of America branch and was able to open a checking account for her trust in under 30 minutes.
If a bank asks you to register your trust into any public record, you may want to tell them, “A trust is a private instrument. I am not willing to give up my privacy rights, and I believe your request for me to do so is unreasonable. Please open my account without asking me to sacrifice privacy.”
Making your trust public record is something to be avoided. It provides no benefit, and it is not legally required. If the bank doesn’t waive the request, I would encourage you to do business with another bank who respects your interests. Finding a bank that doesn’t have this requirement should be very easy.