Answer:
"Retitling" a time deposit is a practice only used by the very brave or those who do not understand the uncompensated risks it generates. Accepting the risk of overstatement, I will say it is not possible to transfer ownership of a bank deposit account except as provided under state law; e.g. at death. Time deposits oftentimes clearly indicate they are not transferable in the language of the instrument itself.
A time deposit first owned by an individual and then "transferred" to a trust reflects a dramatic change in beneficial ownership. A trust supported by a written document is a different person altogether.
The question of whether the bank imposes an early withdrawal penalty when an individual customer cashes out time deposits and deposits the proceeds in time deposits owned by a grantor trust is entirely a matter of bank policy. As a matter of practice, as long as the deposits are remaining in the bank, the depositary institution generally does not impose a penalty.
First published on BankersOnline.com 11/27/06
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