We were informed by a customer's attorney today that if a customer creates a new trust, it automatically replaces any older trust they had established without having to say that in the trust document. Seriously?

Here's the issue: John and Jane Doe had accounts (a checking and a CD) with us that were titled in the name of the John and Jane Living Trust using John's SSN, with John and Jane both being Trustees. John has been deceased for several years. Jane has never asked to change the accounts or open new accounts to use her own SSN for tax reporting so the branch left the accounts as-is.

Jane also has a savings account that is titled as the Jane Doe Irrevocable Trust, and her daughter is the Trustee.

Now Jane wants to change the tax owner on the checking and CD to be under Jane's SSN not John's, as their tax advisor has advised them to fix it so that they stop receiving 1099s for John, and she wants to remove the (old) trust titling from the checking and CD. Upon reviewing the account documentation, we have found that we do not have copies of the John and Jane trust papers. When we asked if they would be able to bring in a copy, they contacted their attorney for assistance and were told that Jane's newer trust automatically replaced the old joint one so we didn't need the old trust papers-end of story.

If we go by that logic (not that we would), Jane has no authority on the checking or CD anymore because she is not the trustee of the new trust that supposedly replaced the old. Nothing in the new trust document states that it supercedes or replaces the old trust.

Jane is adamant that she wants an account in her own name that she controls, and her daughter(new trust's trustee) agrees that the checking account should not be in the name of the new trust or any trust. The twist: She doesn't want to close the existing checking account to make it her own individual account because of having many ACH debits and credits set up for the current account. We would normally require a new account be established to change the tax owner, but were considering an exception depending on what the old trust papers say.

So: Even though it's our own fault that we don't have a copy of the old trust papers for whatever reason, wouldn't we need a copy of those showing what happens when John dies or showing that it contains language about a new trust automatically replacing it (or an amendment to it showing that it was dissolved) or what have you? You would think the attorney would understand the need for an audit trail. I know customers that have multiple trusts and they are all still valid with no new trust replacing the old. Is the attorney crazy?

Without reading your entire senario, why would the bank take advice from the customer's attorney. The bank should be taking advice from their legal counsel.

I don't know about new trusts replacing old, you would need to contact your counsel on that one. Regardless, why not just fall back on your policy and let the customer know that the old account needs to be closed per your policy and then she is welcome to open an account of her own and you would be happy to help her with switching over whatever ACH debits/credits she has currently set up.

It's too lengthy to read, but this part is BS so I assume that answers the question. As noted, never take advice from the other guy's lawyer.

Words to live by!

The solution to this situation is simple.

Close the accounts, cut them checks made payable to exactly how the accounts are currently titled, and let their attorney figure out how to negotiate those checks at another bank.