WASHINGTON (7/12/12)--While credit unions lack full trust powers, they can open trust accounts for their members, Credit Union National Association (CUNA) Federal Compliance Counsel Colleen Kelly said in the July edition of Credit Union Magazine.
Federal credit unions are not permitted by law to administer trust accounts. While some states may legally allow state-chartered credit unions to administer trusts, it is unlikely that any credit unions do so, Kelly said. However, some credit unions do offer full trust services to their members through affiliated credit union service organizations, she noted. Credit unions simply hold trust account funds, and cannot disburse trust account funds.
Credit unions can offer either revocable trusts, such as a payable on death (POD) accounts, or irrevocable trusts. A written trust agreement establishes an irrevocable trust where the grantor gives up all power to revoke the trust.
POD trust accounts can be easily opened at credit unions, but other trust accounts can be more complicated.
Trust agreements are often lengthy legal documents, and Kim Bohannon, a compliance and risk management officer with TVA Employees CU, Knoxville, Tenn., recommends that members provide their credit union with a one-page declaration that includes simply the information the credit union needs to open the account. Information on the delcaration can include the title of the trust, the date on which the trust was executed and the names and contact information of the trustees, beneficiaries and others taking part in the trust.
Trust accounts are addressed in National Credit Union Administration (NCUA) share insurance regulations, Kelly said. Various combinations of trust account owners and beneficiaries can impact insurance coverage for trust accounts in different ways.
The Credit Union Magazine article reminds readers that the NCUA no longer limits insurance coverage to "qualified beneficiaries." As long as the beneficiary is a natural person, charity or nonprofit organization, the beneficiary will be insured separately, Kelly said.
For more of the Credit Union Magazine piece, use the resource link.