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CD Penalties On Death Of Grantor Of Personal Trust When There Are Co-Trustees.

Bobhogan
  |     |   1 posts since 2015

My father died recently, and owned CDs in two credit unions.  They are titled to his personal trust, with originally just him as trustee, but a few years ago he amended his trust to make me co-trustee so I could manage them, and this is reflected in the banks records.  Because there is still a living trustee (me) I'm hearing that I may not be able to close the CDs early without a penalty.  Does anyone have any experience with this?

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Answers
ocsteve
  |     |   96 posts since 2010
I live in So CA and had a similar situation--my aunt and uncle have a Living Trust and are both Trustees of the Living Trust.  This is reflected in the banking records/account statements. interest checks, etc.

One Trustee dies (8/2015) and all the CU & Banks let us break the CD's we wanted to without penalty, but US Bank.  Apparently US Bank in their terms and conditions does not allow for breaking a CD when one of the Trustee is still living.

What we did is I accompanied my aunt to the Bank/CU's and we had an original death certificate for my uncle in hand for them to look at, make a copy, etc.  The older CD's that were for low rates we decided to break early and take the funds elsewhere.  Told them that there was no life insurance, needed funds to pay for funeral, credit card bills, etc. and needed to restructure their deposit portfolio.  Everyone was very kind and let us break the CD's without penalty, but US Bank did not, so we left the two that were there alone, but removed the uncle's name as a Trustee (so the interest checks could be deposited elsewhere).  

Sometimes a little sad story helps.  Everyone but US Bank were very understanding.  Told them in the future we would consider them for future business--nothing personal.

Hope this little bit of our experience helps.
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TedandAfrica Osmundson
  |     |   2 posts since 2016
Sorry to hear your Dad has passed away.  Why would you think that the issuing bank would not want to penalize you in the same way as the original CD holder?   I have no experience with this, however, the terms are still the terms in so far as the CD is concerned.   
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InterestYields
  |     |   76 posts since 2010
So sorry about your dad, many deposit accounts have a term definition under early withdrawal in their deposit agreement such as "an early withdrawal without penalty will generally be permitted in the following circumstances - In the event of death or the adjudication of incompetence of an owner; or Within the Grace Period" so you could look for such terms under the deposit agreements that may be available online, otherwise you could request the deposit agreements.  Also see https://www.depositaccounts.com/community/ask/20029-cd-death-cd-owner.html & terms of the trust.  Good luck during this difficult time & let us know how it goes,
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MidAtlantic
  |     |   142 posts since 2012
Sorry at your loss.
There was another quite recent question on the almost identical point.
The normal situation is that because there is a continuing owner (ie you, the co-trustee) the CD continues as normal.  However, some credit unions will waive the penalties on compassionate grounds, especially if the funds are urgently needed. Best to ask them and see what they say.
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InterestYields
  |     |   76 posts since 2010
I'd still try to speak with the branch managers after reading the deposit agreements for example at https://home.capitalone360.com/terms_cd "If any Certificate of Deposit owner dies or is declared legally incompetent, the Certificate of Deposit can be redeemed early, without penalty" but as this sounds like a Living Trust Account then the CDs should be owned by the trust until that's terminated "Death, Incompetency or Termination: If you die or are declared legally incompetent, or, in the case of a living trust account, the living trust is terminated, we can continue to accept and process deposits to your account until we know about the death/incompetency/termination and have a reasonable chance to act.

  • Living Trust Account. This type of account is owned by a living trust and is managed by no more than 2 trustees, at least 1 of which must be a grantor-trustee. If the account is managed by 2 trustees ("Co-Trustees"), either Co-Trustee may: (i) withdraw or transfer the balance without the other Co-Trustee's consent; (ii) make deposits, close or pledge the account to us as collateral for a debt owed to us; and (iii) endorse and deposit checks payable to either Co-Trustee or the living trust. Each trustee understands and agrees that (s)he, and not Capital One 360, owes a fiduciary responsibility to the living trust and as such, shall manage the account in accordance with the terms of this agreement, the trust document(s) and any applicable laws. The obligations of Co-Trustees under this agreement are joint and several."
http://blogs.sacbee.com/personal-finance-ask-the-experts/2012/07/when-is-penalty-owed-for-cashing-ou...

http://www.alllaw.com/articles/nolo/wills-trusts/terminating-closing-living-trust.html

Potential-simpler early CD closure without penalty it seems is another reason to instead consider POD accounts:

https://www.depositaccounts.com/community/ask/13523-inheritance-taxes-and-pod-accounts.html

http://www.nolo.com/legal-encyclopedia/free-books/avoid-probate-book/chapter1-1.html

http://www.nolo.com/legal-encyclopedia/avoid-probate-transfer-on-death-accounts-29544.html

http://www.nolo.com/legal-encyclopedia/claim-payable-on-death-assets-32436.html

https://www.depositaccounts.com/community/ask/20029-cd-death-cd-owner.html

Let us know the outcome, Best Wishes
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