A client’s father passed away in his Brooklyn apartment last fall. The family was grieving, but they also had immediate financial obligations—the co-op maintenance fees, the final medical bills, the funeral expenses. The father had a will, but his checking account, with a healthy five-figure balance, was in his name alone. The account was frozen. For the next seven months, while the will was validated by the Kings County Surrogate’s Court, the family had to pay for everything out-of-pocket, waiting for the court to grant them access to funds that were rightfully theirs.
This story is common, and it is the primary reason people ask me if they should put their daily checking account into their revocable living trust. The impulse is correct. A core function of a trust is to hold assets so they pass to your heirs without court intervention. But for an account you use every day, the answer requires a deliberate look at the trade-offs between post-mortem efficiency and lifetime practicality.
The Promise of a Seamless Transition
The argument for placing a checking account into a trust is simple: avoiding probate. When an asset is titled in the name of a trust, it is controlled by the trust agreement, not a will. Upon your death, the successor trustee you appointed can step in almost immediately to manage and distribute the funds. You do not wait for a court to issue Letters Testamentary.
For the family I mentioned, if their father’s account had been titled “The John Smith Revocable Trust,” their daughter, as successor trustee, could have walked into the bank with a death certificate and the trust document and settled his final affairs. This immediate liquidity is more than a convenience; it can be a critical lifeline for a surviving spouse or children who depend on that cash flow to maintain a household.
A trust also provides for a different contingency: your own incapacity. If you suffer a stroke or develop dementia, assets held in your individual name become inaccessible. Your family would need to rely on a power of attorney—if you have a well-drafted one—or petition a court to have a guardian appointed. Both can lead to delays. A trust, however, allows your successor trustee to take over management of the account for your benefit, ensuring your bills are paid without interruption.
The Practical Burdens of a Trust-Owned Account
The benefits are clear, but retitling your primary checking account creates daily administrative friction. The process itself can be cumbersome. Some banks have streamlined procedures for trust accounts; others treat it as a complex, document-heavy event. You will likely need new checks, new debit cards, and will have to re-establish any direct deposits or automatic bill payments linked to the old account number.
For an account with a high volume of transactions, this can be a significant undertaking. You must weigh the one-time administrative effort against the potential future benefit. For some of our clients, the hassle is minor. For others, particularly those who run a small business or have complex automated finances, it’s a non-starter. They prefer to keep their operating accounts separate and focus the trust on holding less-active assets like investment portfolios, savings, and real estate.
A Balanced Approach for Liquid Assets
So, what is the prudent path? In many cases, we design a plan that balances these competing needs. We might fund the trust with significant assets—brokerage accounts, real property—while leaving a reasonably modest checking account outside the trust for daily use.
This strategy relies on a companion document called a “pour-over” will. This type of will is simple. It directs that any assets held in your individual name at the time of your death should be transferred—or “poured over”—into your trust. Yes, this means the checking account will have to go through probate. However, in New York, the process may not be as arduous as many fear, especially for smaller balances.
Under the Surrogate’s Court Procedure Act (SCPA) §1301, estates with personal property valued at $50,000 or less can qualify for a simplified small estate proceeding. This is a much faster and less expensive process. By keeping a smaller, active checking account outside the trust, you maintain daily convenience while ensuring the funds ultimately join the rest of your estate under the trust’s management.
Ultimately, this is a question of stewardship. Your estate plan should not make your life more difficult. It should be constructed to serve your family’s needs, both now and in the future. Deciding where to hold your liquid cash is a key part of that intentional design.
If you are weighing this decision, the first step is to create a clear picture of your cash assets and how you use them. Schedule a call with us to review your current account structure and discuss how it fits within your broader legacy goals.
