Banking for Family Trusts: Accounts, Structure, and Compliance

Family trusts are among the most widely used legal structures for HNW wealth planning — for asset protection, estate planning, multi-generational wealth transfer, and tax efficiency. Yet the banking dimension of trust administration is frequently underestimated. Opening bank accounts for a trust is materially more complex than personal account opening, the ongoing KYC and compliance burden is heavier, and the choice of banking institution can significantly affect whether the trust functions smoothly or becomes an administrative burden.

This guide is intended for trustees, trust beneficiaries, settlors, and their advisers who are establishing or reviewing the banking arrangements of a family trust.

What Is a Trust Account?

A trust account is a bank account held in the name of the trustee(s) in their capacity as trustee — not in their personal capacity. The legal title to the funds rests with the trustee; the beneficial interest rests with the beneficiaries. This structure is fundamental: trust assets should never be co-mingled with the trustee's personal or business funds, both as a matter of trust law and good practice.

The account title typically appears as: "ABC Trustees Limited as trustees of the XYZ Family Trust" or simply "Trustee of XYZ Settlement." Banks differ in how they record this titling — ensuring the account documentation correctly reflects the trustee role is important for legal certainty.

For a discretionary trust with multiple potential beneficiaries, the trustee is the account holder and decision-maker. Banks will require full trustee authority documentation before acting on instructions.

Types of Trust Banking Accounts

A trust may require several types of banking account:

Trust current account: For day-to-day trust operations — paying trustee fees, adviser costs, beneficiary distributions, and investment management charges. Should be with a bank offering robust multi-currency capability if the trust holds assets across jurisdictions.

Trust savings or deposit account: For holding liquid cash reserves pending investment or distribution. Interest rates, deposit insurance coverage, and ease of access are the key variables.

Investment custody account: If the trust holds securities (equities, bonds, funds), a custody arrangement with a private bank or custody bank is required. This is distinct from the cash banking relationship and may be with a different institution.

Trust mortgage or loan account: If the trust takes on debt — for example, to fund property acquisition — a separate loan account will be opened under the trustee's name in their trust capacity.

KYC Requirements for Trust Account Opening

Banks must conduct thorough due diligence on trusts before opening accounts, in accordance with their AML obligations. This is typically more burdensome than personal account opening, for the following reasons:

Trust deed: The bank requires a copy of the trust deed (or a certified extract) to confirm the trust's existence, its governing law, the identity of the trustee and settlor, and the powers vested in the trustee. Some banks will accept a "Trustee's Certificate" summarising key trust provisions for confidentiality reasons, but many insist on the full deed.

Trustee identification: Every trustee — individual or corporate — must be fully KYC'd. For a corporate trustee, this means company registration documents, directors' details, and ultimate beneficial owner (UBO) declarations.

Settlor identification: Banks increasingly require full KYC on the settlor (the person who created the trust), even if the settlor has no ongoing legal authority over the trust. This reflects FATF guidance on beneficial ownership.

Beneficiary information: Disclosing beneficiaries is the most sensitive aspect of trust KYC. For a discretionary trust with a wide class of potential beneficiaries (e.g., "descendants of the settlor"), banks typically require disclosure of named principal beneficiaries and any person currently receiving distributions. The days when "beneficiary: family" was acceptable are long past.

Source of funds: As with personal accounts, the bank must understand how wealth entered the trust. Settlement from a business sale requires the sale documentation; settlement from inheritance requires probate documents.

Protector: If the trust has a protector (a common feature in offshore trusts providing oversight of trustee decisions), the bank should also KYC the protector, particularly if the protector has power to remove and replace trustees.

Choosing the Right Bank for a Family Trust

Not all banks are equally equipped or willing to service trust accounts. Key selection criteria:

Willingness to accept trusts: Some retail and challenger banks will not open trust accounts at all, or will only do so for UK-law trusts. Private banks and specialist offshore institutions are generally better equipped.

Multi-jurisdiction expertise: If the trust holds property or assets across multiple countries, the bank should have correspondent relationships and operational capability in those jurisdictions.

Trustee corporate services: Some private banks offer trustee company services alongside banking — useful if you are establishing a new corporate trustee and want an integrated relationship.

Online platform for trustees: Many trustee operations benefit from online banking with granular permissions — the ability to set up multiple authorised signatories with different transaction limits.

Fee transparency: Trust accounts are often charged at higher commercial rates than personal accounts. Request a full tariff schedule.

Offshore Trust Banking: Jersey, Guernsey, Isle of Man, BVI, Cayman

The largest volume of international family trust banking is conducted through offshore trust companies using banks in Jersey, Guernsey, and the Isle of Man. These jurisdictions are preferred because:

• They have robust trust law (Trusts (Jersey) Law 1984 and its equivalents are well-tested)
• The professional trust company sector is experienced and regulated
• Banking infrastructure is established for trust-holding structures
• The jurisdictions participate in CRS/AIA, making disclosure to relevant tax authorities automatic — full compliance is the operating norm

For BVI and Cayman-established trusts, banking is often conducted through a separate account in Jersey, Singapore, or Switzerland, since those offshore jurisdictions have limited commercial banking infrastructure for trust accounts.

CRS Reporting for Trusts

Under the Common Reporting Standard, trusts are reportable entities. This means:

• The trustee must determine whether the trust is a "financial institution" (i.e., it primarily holds financial assets and is professionally managed) or a "passive non-financial entity"
• For reporting purposes, trusts with professional corporate trustees are generally treated as financial institutions and must report on their underlying beneficial owners (settlors with residual interests, protectors, discretionary beneficiaries who received distributions, and named beneficiaries with vested interests)
• The trustee, not the bank, is technically the reporting entity — but the bank will often facilitate reporting through its trust administration platform

For UK-resident beneficiaries of offshore discretionary trusts, the trust's annual accounts and income allocations must be disclosed to HMRC through the Trust Registration Service (TRS) and through the beneficial owner's self-assessment return. The Register of Overseas Entities and related legislation have further increased transparency requirements for trusts holding UK property.

HMRC Trust Registration Service

The UK's Trust Registration Service requires most express trusts with a UK connection to register. This includes UK-resident trusts, non-UK trusts with UK tax obligations, and non-UK trusts that are the owner of UK land or property (as of 2022 legislation).

A registered trust receives a Unique Taxpayer Reference (UTR) and appears on the TRS database, which is accessible to law enforcement and obliged entities (including banks conducting AML due diligence). For trust account opening in the UK, providing the TRS reference has become standard practice.

Practical Tips for Trustees

Establish the trust account before distribution of assets. It is not uncommon for trusts to be created but banking arrangements delayed. This creates risk — if assets need to be distributed or invested quickly, a dormant trust account causes problems.

Maintain a trustee resolution file. All bank instructions should be backed by a trustee resolution. Banks should require this; proactive trustees document resolutions as a matter of course.

Review banking arrangements every three to five years. Banks change their risk appetite, fee structures, and correspondent relationships. A bank that was ideal at trust formation may no longer be the best choice a decade later.

Inform the bank of trust changes. Trustee retirements, appointments of new trustees, beneficiary changes (new additions under a wide class), and amendments to the trust deed should be communicated promptly. Failure to update records creates compliance risk for the bank and operational risk for the trust.

Trust law, tax rules for trusts, and banking AML requirements vary significantly by jurisdiction and change regularly. All trustees should seek advice from qualified legal advisers in the relevant jurisdictions. This guide provides general information only and does not constitute legal or tax advice.

How Global Investments Can Help

Global Investments works with trustees, family offices, and their advisers to navigate the banking and financial requirements of international trust structures. Whether you are establishing a new trust and need guidance on banking institution selection, reviewing existing arrangements, or need support with multi-jurisdictional compliance considerations, our experienced team is available to provide practical, impartial guidance. Contact us to discuss your trust banking requirements.