• Illinois Passes Act Allowing "Convenience Deposit Accounts"
  • October 14, 2009 | Author: Michael D. Morehead
  • Law Firm: Hinshaw & Culbertson LLP - Springfield Office
  • An individual owner of a deposit account commonly names a joint tenant on the account as an accommodation to the individual owner. However, doing so can create confusion and conflict related to the account’s ownership upon the death of the account creator. On August 4, 2009, Illinois enacted the “Banking Convenience Account for Depositors Act” (Act), which provides a solution to this problem, albeit a temporary one.

    The Act includes important protections to all banks conducting business in Illinois in dealing with the pitfalls and potential liability resulting from distributions of deposit account funds upon the death of an individual deposit account holder. It also provides a new estate planning tool that anyone who has named or is considering naming a joint tenant on a deposit account as a mere accommodation should consider. Estate planning and probate practitioners will also want to take notice of this opportunity.

    The Act becomes effective on January 1, 2010. However, the current version of it will sunset on December 31, 2015.

    Under the Act’s provisions, any bank conducting operations with Illinois residents is authorized, but not required, to offer a “convenience deposit account.” Significantly, the Act does not specifically limit the authority to provide these “convenience accounts” to only those banks actually located in Illinois. Nor is there any exclusion of authority based upon the form or type of the bank’s charter. Therefore, the new broad authority for establishing “convenience accounts” will be available to both state and national chartered banks, so long as they conduct business with Illinois resident depositors.

    This new form of deposit account must be established by a primary account holder. But it specifically allows that person to designate a second party and grants that second person authority to make additional deposits to the convenience account. Convenience accounts must be formally titled in the name of both the primary depositor and the secondary convenience depositor. Once established, each party named may make additional deposits and, more importantly, each may make any withdrawal of funds for the primary depositor’s convenience and needs.

    Moreover, the primary depositor is granted exclusive authority to terminate the second party’s authority to make deposits or withdrawals at any time. Under the Act’s provisions, a bank will not be liable for allowing any continued deposits or withdrawals by the convenience depositor until it actually receives written notice of termination authority from the primary depositor. Further, the Act specifically provides that the bank will not be liable for allowing the continued withdrawal of deposits by the convenience depositor after the death of the primary depositor, absent the receipt of actual written notice of the primary depositor’s death. Any such withdrawal by the convenience depositor, absent the required notice, will act as a complete release of liability for the bank.

    A significant aspect of this new form of deposit account is that it will help to alleviate the bank’s potential liability and confusion concerning the ownership of deposited funds upon the primary depositor’s death. Unlike traditionally established joint deposit accounts or those designated as “pay on death,” all deposit funds held in a convenience account are legally owned by the designated primary depositor. The Act specifically provides that a convenience account does not establish any joint account relationship, presumption of any gift by the primary depositor, or any right of survivorship for the convenience depositor’s benefit.

    Upon notice of the primary depositor’s death, the bank is specifically authorized, absent any contravening order or injunction, to deliver the deposited funds held in the convenience account directly to the designated executor, administrator or estate representative. Once such delivery of funds is made, the bank is completely released from liability to any other party claiming a right to those funds.