How to Set Up a Trust Account for Someone Else's Money

What a trust account is and when you need one

A trust account is a bank or brokerage account held in your name but legally designated to benefit someone else—usually a minor, an incapacitated adult, or a beneficiary you want to protect. The account is yours to manage and control, but the money inside belongs to the beneficiary. You are the trustee: you make deposits, pay bills from the account, and decide how the money is spent, but you cannot take it for personal use.

You need a trust account when you are managing money for someone who cannot manage it themselves—a child, an elderly parent with cognitive decline, or a disabled adult—and you want a clear legal structure that avoids probate and keeps the account separate from your own finances. It is simpler than a formal trust document and faster to set up than guardianship through the courts.

Trust accounts are not the same as joint accounts. In a joint account, both people own the money equally and can withdraw it. In a trust account, you control it but hold it in trust for the other person. That distinction matters for taxes, creditor claims, and what happens to the money if you die.

Key Takeaways

Most banks offer trust accounts (called Uniform Transfers to Minors Act accounts for children, or in-trust-for accounts for adults) that you can open with a single visit and a few forms.
You will need the beneficiary's Social Security number, date of birth, and address, plus your own identification and proof of address.
The account title tells the bank who the trustee is and who the beneficiary is, which determines how taxes are filed and what happens if you die.
Money in a trust account for a minor may affect their financial aid may be able to access, so check with the school or program before depositing large sums.
You can name a successor trustee in writing so someone else takes over if you become unable to manage the account.

Types of trust accounts and which one to open

The type of trust account you can open depends on who the beneficiary is and what state you live in.

Uniform Transfers to Minors Act (UTMA) accounts are the standard for children under 18 or 21 (depending on your state). You open it in your name as custodian, with the child named as the beneficiary. The child does not need to sign anything. When the child reaches the age of majority in your state—usually 18 or 21—the account automatically transfers to them and they take full control. All 50 states recognize UTMA accounts, though the rules vary slightly by state.

In-trust-for (ITF) accounts are for adults. You open the account in your name "in trust for" the beneficiary. These are common for aging parents, disabled adults, or anyone you want to leave money to without going through probate. Unlike UTMA accounts, ITF accounts do not automatically transfer when the beneficiary reaches a certain age—you remain the trustee until you die or resign, and the account passes to the beneficiary through your estate or according to your written instructions.

Payable-on-death (POD) accounts are simpler but less flexible. You own the account outright, but you name a beneficiary who receives it automatically when you die. You can withdraw money anytime while alive. POD accounts are useful if you want to keep full control now but may support the money goes to someone specific later, but they do not give you the trustee structure if you need to manage money for someone unable to manage it themselves.

Documents and information you need to bring

Before you visit the bank, gather these items:

Your government-issued photo ID (driver's license, passport, or state ID)
Proof of your current address (utility bill, lease, or mortgage statement dated within the last 60 days)
The beneficiary's full legal name, date of birth, and Social Security number
The beneficiary's current address (if different from yours)
If opening an account for a minor, you may need to show your relationship to the child (birth certificate, custody order, or guardianship papers)
Initial deposit amount (many banks require a minimum, often $25 to $100)

If you are opening an account for an adult beneficiary who is incapacitated, some banks will ask for a power of attorney or court order showing you have legal authority to manage their finances. If you do not have one, ask the bank whether they will accept a notarized statement of your relationship and intent.

The account setup process at the bank

Call ahead or visit your bank's website to confirm they offer trust accounts and what documents they require. Some banks have different rules for UTMA versus ITF accounts, and some credit unions may have limited options.

When you arrive, tell the banker you want to open a trust account (specify UTMA, ITF, or POD). They will give you a signature card or account agreement that names you as trustee and the beneficiary by name and Social Security number. Read the account title carefully—it should say something like "Jane Smith, Custodian for Michael Smith, a Minor" (for UTMA) or "Jane Smith, In Trust For Michael Smith" (for ITF). If the title is wrong, ask them to correct it before you sign.

You will sign the account agreement. The beneficiary does not sign anything for UTMA or ITF accounts. Make a copy of the signed agreement and the account number for your records. Ask the banker to explain the bank's rules on withdrawals, whether the beneficiary can be added as a signer later, and what happens if you die.

Deposit your initial amount. The account is now open and ready to use.

Tax reporting and what the beneficiary needs to know

Money in a trust account generates tax liability. If the account earns interest or dividends, you will receive a 1099 form at tax time showing the income. How you report it depends on the account type.

For UTMA accounts, the income is taxed to the child (the beneficiary), not to you. You will need the child's Social Security number to file taxes. The first $1,250 of unearned income per year (as of 2024, though this amount changes annually) is usually not taxable for a dependent child, and the next $1,250 is taxed at the child's rate. Income above that is taxed at the parent's rate. This is called the "kiddie tax" rule. Check the IRS website or a tax professional for the current year's thresholds.

For ITF accounts, the income is taxed to you (the trustee) unless you have a separate tax ID for the trust. Most straightforward ITF accounts do not have a separate tax ID, so you report the income on your own return. This can affect your tax bracket, so keep records of all deposits and withdrawals.

When the beneficiary turns 18 or 21 (depending on your state and account type), tell them the account exists and how to access it. For UTMA accounts, they will need to sign new paperwork with the bank to take control. For ITF accounts, explain that you remain the trustee unless you have named them as successor trustee in writing.

Naming a successor trustee and what happens if you die

If you die while managing a trust account, the bank needs to know who takes over. For UTMA accounts, most states allow you to name a successor custodian on the account agreement when you open it. Ask the banker whether your bank offers this option and fill it out. If you do not name one, the account may go through probate or be frozen until a court appoints a guardian.

For ITF accounts, you should write a straightforward letter or will stating who you want to manage the account if you become unable to do so. Keep this with your important documents and tell your family where it is. You can also ask the bank whether they allow you to name a successor trustee on the account agreement itself.

If you die without naming a successor, the account does not automatically pass to the beneficiary—it becomes part of your estate and may require probate. That is why naming a successor in writing is important, even if it is just a note in your will.

Common mistakes to avoid

Do not deposit money into a trust account and then withdraw it for your own use. That is a breach of trust and can create tax problems and legal liability. If you need the money back, close the account or ask the bank how to do it properly.

Do not open a joint account instead of a trust account if you want to manage money for someone else. A joint account makes the other person a co-owner, which means they can withdraw everything, and it may create tax and creditor problems you did not intend.

Do not forget to tell the beneficiary (or their parent or guardian) that the account exists and what it is for. If you die suddenly, they may not know to look for it, and the money could be lost or delayed.

Do not assume a trust account protects the money from creditors or lawsuits. In most states, a trust account is still your asset for purposes of debt collection, even though you hold it in trust. If you need real asset protection, you may need a formal trust document, which is more complex and usually requires a lawyer.

Frequently Asked Questions

Can the beneficiary withdraw money from the account while I am still alive?

For UTMA accounts, no—you are the sole signer until they reach the age of majority. For ITF accounts, it depends on the bank. Some banks allow you to add the beneficiary as a signer, but most do not. Ask your bank what their policy is. You can always withdraw money and give it to the beneficiary if they need it.

What happens to the account if the beneficiary dies before I do?

For UTMA accounts, the money becomes part of the child's estate and passes according to their will or state law (usually to their parents). For ITF accounts, the money becomes part of your estate unless you have named a different beneficiary in writing. Write down what you want to happen and keep it with your will.

Will a trust account affect financial aid or benefits?

Yes. Money in an UTMA account in a child's name counts as the child's asset for FAFSA (federal student aid) purposes and may reduce their aid. Money in an ITF account in your name does not count against the beneficiary's aid. If the beneficiary receives means-tested benefits like SSI or Medicaid, a trust account in their name could disqualify them. Speak with a benefits counselor before opening an account for someone on government information.

Can I change the beneficiary of a trust account after I open it?

No. The beneficiary is set when you open the account and cannot be changed. If you want to move the money to a different beneficiary, you must close the account and open a new one. This is why it is important to be certain about who the beneficiary should be before you sign the paperwork.

Do I need a lawyer to set up a trust account?

No. A trust account is a straightforward bank product that you can set up yourself in one visit. You only need a lawyer if you want a formal trust document (which is more complex and expensive) or if you need legal information about protecting assets or managing finances for someone with special needs.

This guide is for general information only and is not medical, financial, legal, or other professional advice. For decisions specific to your situation, consult a qualified professional. See our Editorial Policy.