trust account
Noun: A bank account, typically a savings account, established by a person (the grantor or settlor) who designates themselves as the trustee to manage the funds for the benefit of another person or entity (the beneficiary). The grantor retains control over the account during their lifetime, and upon their death, the remaining balance is transferred directly to the named beneficiary.
This term is used primarily in legal and financial contexts to describe a specific estate planning tool. It allows an individual to set aside and manage assets for someone else, with a clear mechanism for transfer after death, often avoiding the probate process.
- The grandmother set up a trust account for her grandson's future education expenses.
- Funds in a trust account are managed according to the terms set by the person who created it.
- As the trustee of the trust account, he had a legal duty to manage the money responsibly for his sister's benefit.
- "Totten trust" or "Payable-on-Death (POD) account": These are common, informal names for a revocable trust account in a bank. The account holder can deposit or withdraw funds at any time, and the beneficiary has no rights to the money until the account holder's death.
- He converted his regular savings into a Totten trust account, naming his niece as the beneficiary.
- Fiduciary Account: A broader term for any account where one party (the fiduciary) manages assets for the benefit of another, which includes trust accounts.
- Escrow Account: A type of trust account where assets are held by a third party pending the fulfillment of a condition, such as the completion of a real estate transaction. While also a trust arrangement, it is typically for a specific, short-term purpose rather than long-term beneficiary planning.
- Savings trust
- Trustee account
- POD account (Payable-on-Death account)
The term "trust account" has a distinct, specialized meaning in law and finance as defined above. It should not be confused with: * General feelings of trust in a commercial relationship (e.g., "We have a trust account with that supplier" is not a standard use). * An account held by a business (like a law firm or real estate agency) to hold client funds separately from the firm's operating accounts, which is properly called a "client trust account" or "IOLTA account" (Interest on Lawyers' Trust Accounts).
- a savings account deposited by someone who makes themselves the trustee for a beneficiary and who controls it during their lifetime; afterward the balance is payable to the previously named beneficiary