It starts out innocently enough, you bank with Chase, but your new mortgage is through Bank of America, and they offer you a half a percent discount on your mortgage if you open a new account with them. Then a local credit union offers a great rate on a car loan, so you open an account with them and become a member. Another bank offers you $500 for opening a checking and savings account combination, or some interest rate higher than 0.01%. Next thing you know, it has snowballed, and you are now the proud owner of a dozen checking and savings accounts and aside from the main two accounts you use, you don’t know what is in each account and can barely remember where they all are. You have more accounts than you know what to do with.
This seems like an annoyingly positive problem to have, “ooh I have so many bank accounts, I don’t know what to do!” And it is not an inherently a negative thing. However, it can cause some problems, including costing money.
First and foremost, money is stressful whether you have it or not. Having that many accounts is difficult to manage and think about on a regular basis. How many checkbooks do you really want to balance? Most people don’t want to balance the one, let alone any more. If the accounts are consolidated and simplified, managing them is only that much easier.
Second, when you die, one of your loved ones must now wrangle all of these accounts. If you are married, your surviving spouse must now go into all of these banks and credit unions with a death certificate and remove your name from the accounts. If you have several financial institutions, this is going to be tough on a grieving spouse. If you are not married, then your executor or trustee will need to manage and consolidate all of these accounts.
If you have a revocable trust, and all of the accounts are properly titled in the name of the trust, then your trustee will have a much easier time consolidating the accounts into one account. However, most people tend to leave some accounts outside of the trust. Typically, they leave their main checking account out of the trust. But what happens when someone has a dozen accounts? If several accounts are outside of the trust, the trustee’s job is to contact all of those banks and find out if there is a beneficiary on the account or not. Any account passing to a beneficiary goes to that beneficiary directly and does not go into the trust. If there are several bank accounts not in the trust and without beneficiaries, then the trustee must keep track of the amounts in all the accounts. Once the trustee is sure they have all the accounts, they must add up all the assets outside of the trust and make sure they total less than $150,000. If they do, then the trustee must fill out paperwork for each and every bank account attesting that the estate is less than $150,000 and not subject to probate, and that the balance of the accounts should be delivered to the trust. Sometimes banks have their own forms for this, and sometimes it is easier to hire an attorney to draft a Small Estate Affidavit. Either way, it is a lot of extra work and time to be put in by the trustee.
If the total of those accounts outside the trust exceeds $150,000, then those accounts are subject to a probate. If you only have a Will, or no estate plan, then all of your assets are subject to probate as well. Probate is expensive and can be a long process. Multiple bank accounts can prolong the process and cause more hassle because probates can require extensive accountings that can be difficult with so many accounts. It is frustrating to have to open a probate knowing that the decedent created a trust in order to avoid probate. Having multiple accounts can cause extra stress to the executor or loved one because they have to track down all of your assets and they might never be sure that they have everything.
The best way to avoid all the trouble, both for yourself and your loved ones, is to consolidate your bank accounts, and have them properly titled in the name of your revocable trust. It will make life much easier for you, your family and it will avoid unnecessary legal fees.