Setting Up Business Account for Insurance Agent

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Question:

We have a customer who runs an insurance agency titled under his name,(John Doe, Agent). If he wants to open an account so that the premiums he collects on behalf of certain companies can be swept out by ACH on a regular basis, how should it be set up? He is a sole proprietor; should he have access to the funds, TIN or SSN for the account? He wants "trust account" in the title. What if he receives an IRS levy, could these funds be taken? Please let me know the appropriate way to set up this account type.

Answer:

Because the funds in the account belong not to the agent but to the insurance companies (or, in some cases, to his customers), the title of the account should show its fiduciary nature in some way. You could accomplish that by showing that the account is a "premium escrow" account. The TIN for the account should be the agent's Social Security number, or if he has an EIN, you could use the EIN. If he has an actual trust established, set the account up in the name of the trust and use the trust's EIN. If the bank receives an IRS levy in the agent's individual name, the funds in the trust or escrow account should not be affected unless the levy documents specifically identify the account and its fiduciary nature.

First published on BankersOnline.com 8/09/10