Land Trust Checking Account Needs A Fed TaxID?

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The Saga continues. This is a continuation of the topic I started in the tax forum.

http://www.thecreativeinvestor.com/ViewTopic15995-23.html

I am still unclear how to get a checking account for our trusts to be put in our SSN instead of Federal TaxID number.

We have gotten confirmation from two banks who said that they won't open an account unless we have a Federal TaxID for the trust and that the trust is used for business purposes.

Here is the catch. The ownership came from us personally into the trust, not from a business, but the banks said that if the property is being used as a rental, it is considered business therefore it needs a business TaxID.

Dave, where are you??

Comments(5)

  • nebulousd13th November, 2003

    hey joel,

    have you thought about setting up an LLC and letting the beneficial interest of the Trust be the LLC

  • joel13th November, 2003

    I have thought about it, but right now it costs $200 bucks a year per LLC in North Carolina.

    And since the Trustee is out of state, the person who is suing would have to travel out of our state NC to put our trustee under oath to give up the names of the beneficiaries.

  • DaveT13th November, 2003

    Joel,

    I have set up living trusts for my family with different assets transferred into the trust. I am in the process of establishing an irrevocable trust for my Mother and transferring assets from her living trust into the irrevocable trust.

    Just part of our family estate planning.

    I have taken a copy of the trust agreement to the bank and opened a bank account in the name of the trust. In each case for our family living trusts, the bank allowed the grantor's SSN to be used as the tax id for the account. In NC we are dealing with BB&T and Piedmont Federal Savings & Loan. In neither case, did the bank ask what other assets were held in the trust.

    In SC, I formed a living trust for my sister-in-law and opened a bank account in the name of the trust with my wife as trustee. We used my sister-in-law's SSN for the tax-ID, but later changed the tax ID for the bank account to the trustee's SSN (my wife), because we wanted my sister-in-law's SSN off the account for Medicaid planning purposes. In SC, I am dealing with Carolina First Bank NA.

    In all of these trust bank accounts, the trustee is a family member with the power to write checks. Each of these trust agreements was established for our estate planning, and is not restricted to the number or type of assets that may be transferred into the trust.

    Now, your situation is a little different in that you appear to have an unrelated party as the trustee. In your case, I would not try to fight the bank. I would not establish a bank account under the trust. Instead, use the trust as a title holding device only.

    Conduct your rental property management activities outside of the trust. Establish an LLC to manage your rental properties, and make your LLC the beneficiary of the land trust(s). Open your bank account under the beneficary name, using your SSN. If you have a separate tax-id for the LLC, then give that number to the bank instead.

    If you receive checks written to the trust, just have your trustee endorse the checks to you if you are the trust beneficiary, or to your LLC if it is the beneficiary. Now endorse the check again and deposit it into your property management account.

    If you have a lot of equity in your properties, I suggest you consider limiting your LLCs "capitalization" to about $250K. Maybe you would only want your LLC to be the beneficiary of four land trusts because the equity in the properties plus the LLC bank account would give the LLC a net worth of about $250K.

    For the next four properties (if the equity approaches $250K), establish a second LLC with a separate LLC bank account to manage these properties. Repeat until you run out of properties, each time limiting your LLC's net worth to about $250K.

    This will help you limit your asset exposure should one of your LLCs be sued.

  • joel13th November, 2003

    Cool. Thanks Dave. Yes. I think the difference between our situation and yours, is that you have a Living Trust, and we have Land Trusts.

    We aren't setting up the checking accounts because we WANT to. It is so we can just cash a stupid insurance claim check.

    Even though we are listed as additional insured, the name on the check needs to go to what name the policy is written to. And write now it is written to the Land Trust name. That is why we are having such a problem cashing the check.

  • Dreamin13th November, 2003

    We have set up bank accounts w/land trust name for properties that we "own". we really dont own anything even in the trusts but that is a legal trick with the way the Land trust is set up which your atty can help with. I am not sure how your state works or how the trusts are actually set up. The Trustee (if not you) may have to open an account and put you on as a owner of the account. Not knowing the details, not being from your state and mostly not being an atty I hope you can take my comments in the form as possibly helpful only.

    I am surprised that they are requesting a Fed id.

    Question: were these trusts filed with the local courthouse clerks office under the trust name and your SS's?

    Here Land trusts are filed with the local county courthouse as a DBA (can be under a business fed ID or a personal SS) with this basically you should be acceptable with your banks to open and account under your SS and without your name on actual checks (can be just in the trusts name).

    I agree that any rentals should primarily be in an LLC regardless of the expense or such stucture but if you own property (namely family property in our case) and it is in a trust a DBA form (we take this to the bank that is all they require) should allow your local bank to open an account under your SS's regardless of their typical standard rules.

    Worked here for us. the account is in the trusts name,file with our SS and we are the only persons that can use the account.
    hope this helps

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