Definition of a Fiduciary Bank Account

Written by jennifer b. duffey
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In its simplest form, a fiduciary bank account is a deposit account in which the funds are owned by one individual or group of individuals and managed by another individual or group of individuals. The most common forms of these types of accounts are trusts, IOLTAs and certain escrow accounts.

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Trusts are separate legal entities in which a granter creates the entity on behalf of the beneficiaries. The granter then transfers assets, either liquid or tangible, into the trust and appoints a trustee to oversee distribution. Any amounts of cash are held in a trust account.

Estate Accounts

Very much like a trust account in function, these accounts are established to oversee the final distribution of estate assets. In this case, an executor oversees the financial activities and ensures that all final liabilities are cleared before distribution to the heirs.


Escrow accounts have two primary uses. First, these accounts are used to hold funds until the purchase of service can be verified or terminated. This allows for relatively risk-free financial transfers for payments. Secondly, escrow accounts are used by mortgage lenders to hold funds on behalf of the borrower to pay taxes and insurance premiums.


Interest on Lawyers Trust Accounts are vehicles to allow attorneys to maintain client funds in a separate account from the business funds of the attorney firm. These accounts are established at no cost to the client or the attorney. Traditionally, funds are distributed to the clients rather quickly, but if funds are held for a substantial time, any interested earned will be forwarded to the client.

Choosing a Fiduciary

In considering a person to serve as a fiduciary for any account or asset, it is important to fully define the duties required. This will help prevent any confusion. Then, carefully examine the characteristics that are important for that particular position. Lastly, it is imperative that the fiduciary maintain the highest level of trust and serve the best interests of all parties involved.

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