Answer:
Both the IRS and the FDIC use the term "revocable trust" in reference to a bank account which is not supported by a written agreement, but has POD provisions under state law.
This revocable trust does not require documentation, only titling in accordance with state law. On the other hand, a grantor trust is always supported by a written agreement.
However, in a more sophisticated context, a Grantor trust may also describe itself as revocable. The adjective just describes one feature of the trust.
IRS regulations describe grantor trusts by listing a number of features a written trust agreement might contain. In essence, they look to how much control the people setting up the trust retained in the agreement. If they can do things like revoke it or change beneficiaries, it is a "grantor" trust. In effect, the assets in the trust still belong to the grantors (the people who set the trust up) - its income is still taxable to them.
Generally, a grantor trust becomes irrevocable on the death of one of the parties who established it, but that is not always the case.
Financial institutions titling accounts in the name of a Grantor trust have a policy decision to make on documentation. Generally, they may require:
* a complete copy of the trust,
* the first and last page of trust, or
* a synopsis of the trust completed by the attorney who drafted it, but acknowledgedby the grantors, aka "trust certification."
For several reasons, I would suggest the third method. As it is a policy decision, your institution's attorney should be consulted. He or she may be able to develop a certification form that you can just give to your customers for completion when these accounts are established.
First published on BankersOnline.com 2/4/02
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