Can a Trustee Withdraw Money From a Trust Account?

Matthew Carroll

April 25, 2023

Trust Account

Trusts can be a great way to manage your assets during your lifetime and after your death. However, they have some strict rules that trust account must follow.

If you’re a trustee, know the rules before withdrawing any money. Otherwise, you could get in trouble for misconduct.

Taking Money From a Trust Account

A trust is a legal entity that allows you to transfer assets you own into the ownership of a trustee. The trustee then manages the support for the beneficiaries you’ve named.

The trustee has a fiduciary duty to administer the trust for your benefit while alive and for your beneficiaries’ future benefit. You can also name a successor if the original trustee becomes incapacitated or dies.

Trustees have access to a bank account that only they can use to distribute money by the trust rules. They can write checks, schedule Automatic Clearing House transfers, and withdraw cash.

Taking money out of a trust account for personal use is theft. A trustee may be liable for criminal and civil penalties if they’re found guilty of this. Talking with your estate planning lawyer before withdrawing is a good idea to ensure you’re doing it correctly. Often, the lawyer can help you avoid any issues or complications.

Taking Money From a Beneficiary Account

A beneficiary account is a type of bank account that allows a person to transfer ownership of their performance to another party after death. These accounts bypass the probate process so heirs can immediately claim the assets.

A Beneficiary can be any legal person or entity named to receive the funds when you die. This includes people, nonprofits and businesses.

Most banks offer a cost-free service that turns your account into an informal trust, then names a person, group or organization as your beneficiary. This account is called a Payment on Death (POD), In Trust For, Transfer on Death or Totten Trust account.

A beneficiary can claim the funds in a POD account by showing up at the bank and providing a certified copy of her death certificate. The bank will then provide them with a few forms, and the money is transferred to them instantly.

Taking Money From a Loan Account

The trustee of a trust is a third party who manages the funds held in the account for the benefit of the beneficiary(s). The report’s creator, a settlor or grantor, names the trustee and grants them the authority to act on their behalf.

Trustees can take money from the account, but only under certain conditions. First, they must have a court order authorizing them to withdraw the money.

Second, they must have access to the account to make the withdrawals. They must be named beneficiaries of the fund or successor trustees in the deceased’s will.

A trustee withdrawing money from a loan trust can affect the estate’s tax situation. It can also trigger a gift with reservation (GWR), which may bring the entire trust value into the estate.

Taking Money From an Investment Account

In many cases, a trustee can withdraw money from the investment account of a trust. However, they must do so by the terms of the faith and according to their fiduciary duty to the beneficiaries.

If a trustee is investing using the funds in a trust for their benefit, this is considered a breach of their fiduciary duty. This can result in legal action being taken against them.

A traditional or SEP IRA is one type of investment account a trustee might be able to withdraw money. Self-employed individuals or small business owners can use these accounts to save for retirement.

In addition, a trustee can use the funds in a trust account to pay fees related to administrative duties or expenses associated with the property included in the trust. They can also withdraw funds for funeral costs or repay debts and taxes.