We are not aware of any Illinois law that expressly refers to an FBO account. However, Illinois does have a statute — enacted in 2009 — that expressly authorizes banks to offer “convenience accounts,” which appear to be comparable to FBO accounts. Our description of this law, presented at our annual IBA Bank Counsel Conference in 2009, is copied below.
Note, however, that the law sunsets at the end of this year (December 31st). We have not pursued an extension of the law in our legislature, since none of our members has expressed an interest in an extension, and we are not aware of any financial institutions that have been offering these accounts in Illinois. If your organization would have an interest in eliminating the sunset date in the law, please let us know, and we will be happy to bring this issue to the attention of our Government Relations Committee.
15. Banking Convenience Account for Depositors Act Public Act 96-123, Effective January 1, 2010
Summary: Creates a new “Banking Convenience Account for Depositors Act” that authorizes depository institutions to provide “convenience accounts” to customers. The Act permits a depositor to open an account in the names of both the depositor and another person known as a “convenience depositor.” Both the depositor and the convenience depositor can make deposits to and withdraw funds from the account for the convenience of the depositor. The depositor remains the owner of the account, and the convenience depositor has no right of survivorship to the account.
The Act protects the depository institution for payments made to the convenience depositor, including payments made to the convenience depositor after the death of the depositor but before the bank receives written notice of the depositor’s death.
The Act is permissive in nature. In other words, depository institutions are not required to offer these accounts. Additionally, the law “sunsets” five years after its enactment date (i.e., it is automatically repealed on December 31, 2014).
Practice Notes: (1) The Act is meant to serve as the functional equivalent of a “poor man’s power of attorney” without necessitating the maintenance of a joint tenancy account. Notably, New York has had a similar law (Section 678 of the New York Banking Act) since the mid-1990s that has generated very little interest. To quote a representative of the New York banking industry: “While many legal theoreticians believe that customers want accounts that give co-signers signature authority but do not pass outside of an estate on the customer’s death, actual customers want old-fashioned joint accounts. As a result, I am not aware of any banks in the State that currently offer convenience accounts.”
(2) Bank counsel should be aware that reliance on these accounts could prove problematic over time, since the law expires in five years. Depository institutions that do offer these accounts will need to address that event in their underlying account documents. No doubt many less sophisticated customers, for whom this type of account was designed, will be left surprised by the outcome at that time, irrespective of earlier disclosures.
Please let us know if you have any questions.