What is the correct way to open a deposit account for a minor? Should we open an account under the “Uniform Gifts to Minors Act,” with an adult acting as a custodian for the account and the minor prevented from accessing the account funds until they reach 18 or 21 years of age? Or should we open the account for the minor with their parent as a joint owner?

There is more than one way to open an account for a minor in Illinois, and the best option depends on your customer’s intentions for the account, including whether their intent is for the minor to access the account funds. As discussed in more detail below, and at your customer’s discretion, you may open a custodial account under the Illinois Uniform Transfers to Minors Act (UTMA) or you may open an account in the minor’s name — with or without their parent (or another adult) as a joint owner.

UTMA Accounts

Illinois UTMA accounts are custodial accounts that allow funds to be set aside for a minor while restricting the minor’s use of the funds. Unlike ordinary accounts, UTMA accounts must be designated in the name of the minor’s account custodian followed by the words “as a custodian for ………. (name of minor) under the Illinois Uniform Transfers to Minors Act,” and this language must be used for custodial property to be transferred into an UTMA account. Such transfers are irrevocable, as “the custodial property is indefeasibly vested in the minor.”

UTMA accounts terminate when the minor reaches the age of majority, which may be 18 or 21 years of age, depending on the type of UTMA account. UTMA accounts also may be for the benefit of only one minor, and only one person can be designated as custodian, whereas a minor account can have one or more authorized signers.

Minor Accounts

The Illinois Banking Act expressly authorizes state banks to accept deposits made by minors and open accounts in their names, and a bank’s rules and regulations with respect to an account opened in the name of a minor is binding on them as if they were of full age and legal capacity. A minor account functions like an ordinary account opened for an adult, and it is possible for a minor to hold an account individually, or in joint ownership with another party, such as a parent.

Note that the Illinois Banking Act’s authorization to accept deposits from minors has not been tested in court with respect to deposit account features that could be considered credit-related, such as overdraft and right of setoff provisions. To ensure that your bank can enforce any overdraft and offset provisions for a minor’s deposit account, it may be advisable to ask the minor’s parent to join the account as a joint owner.

For resources related to our guidance, please see:

Illinois Uniform Transfers to Minors Act, 760 ILCS 20/10(a)(2) (“Custodial property is created and a transfer is made whenever . . . (2) money is paid or delivered to a broker or financial institution for credit to an account in the name of the transferor, an adult other than the transferor, or a trust company, followed in substance by the words: ‘as custodian for ………. (name of minor) under the Illinois Uniform Transfers to Minors Act’ . . .”)

Illinois Uniform Transfers to Minors Act, 760 ILCS 20/12(b) (“A transfer made pursuant to Section 10 is irrevocable, and the custodial property is indefeasibly vested in the minor, but the custodian has all the rights, powers, duties, and authority provided in this Act, and neither the minor nor the minor's representative has any right, power, duty, or authority with respect to the custodial property except as provided in this Act.”)

Illinois Uniform Transfers to Minors Act, 760 ILCS 20/21(a) (“The custodian shall transfer in an appropriate manner the custodial property (to the extent that it has not been used pursuant to this Act) to the minor or to the minor's estate upon the earlier of: (1) the minor's attainment of 21 years of age with respect to custodial property transferred under Section 5 or 6; (2) the minor's attainment of majority under the laws of this State other than this Act with respect to custodial property transferred under Section 7 or 8; or (3) the minor's death.”)

Illinois Uniform Transfers to Minors Act, 760 ILCS 20/11 (“Single Custodianship. A transfer may be made only for one minor, and only one person may be the custodian. All custodial property held under this Act by the same custodian for the benefit of the same minor constitutes a single custodianship.”)

Illinois Banking Act, 205 ILCS 5/45.1 (“A state bank may accept deposits made by a minor and may open an account in the name of such minor and the rules and regulations of such bank with respect to each such deposit and account shall be as binding upon such minor as if such minor were of full age and legal capacity.”)

Joint Tenancy Act, 765 ILCS 1005/2(a) (“When a deposit in any bank . . . transacting business in this State has been made or shall hereafter be made in the names of 2 or more persons payable to them when the account is opened or thereafter, the deposit or any part thereof or any interest or dividend thereon may be paid to any one of those persons whether the other or others be living or not, and when an agreement permitting such payment is signed by all those persons at the time the account is opened or thereafter the receipt or acquittance of the person so paid shall be valid and sufficient discharge from all parties to the bank for any payments so made.”)