Credit Cards, Debit Cards, and Trusts - American Academy of Estate Planning Attorneys (2024)

Credit cards and debit cards can be very useful and convenient tools. In fact, the vast majority of Americans have at least one credit card.

Sometimes it can make sense to use cards with a trust. The simplest example is one most people don’t even think about.

John and Mary have a revocable trust. John and Mary have credit cards in their names which they use to pay their living expenses. John and Mary, as trustees, use the trust’s bank account to pay their credit card bill each month. They do this either by writing a check or by some form of electronic bill payment.

Of course, John and Mary may receive airline miles, cash rebates, or other rewards when the trust pays their credit card bill.

Credit cards in the name of the trust often are difficult to obtain. You could have a debit card linked to a trust account. I would not suggest giving such a card to a beneficiary, other than a beneficiary who is also the grantor/trustee. There could be all sorts of problems with doing so, such as that the trustee is breaching their fiduciary duty by doing so. Generally, it is much better to have the beneficiary have a card in their own name.

Often, beneficiaries have trusts set up for their share of an inheritance because they may be young, inexperienced, or have demonstrated poor financial decision-making ability. In such cases, they may have poor or no credit and may not be able to obtain a credit card on their own. In such cases, the trustee could arrange a secured credit card for the beneficiary. This will allow the beneficiary to use a credit card to demonstrate their financial responsibility. The trust will have a downside limited to the amount of the secured line. The beneficiary can begin building or repairing their credit history.

Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (800) 846-1555
www.aaepa.com