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An LLC would like to open a deposit account. The LLC is owned and managed by a trust, but the trustee does not want to serve as an authorized signer for the account. Can the trustee open the account with two non-trustees as authorized signers? – IBA Compliance Connection

IBA Compliance Connection

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An LLC would like to open a deposit account. The LLC is owned and managed by a trust, but the trustee does not want to serve as an authorized signer for the account. Can the trustee open the account with two non-trustees as authorized signers?

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We recommend suggesting that the trustee open the account, naming the LLC as the account owner, and having both the trustee and the two individuals be authorized signers.

The Illinois Trusts and Trustees Act limits the types of powers that a trustee may delegate to non-trustees. It prohibits trustees from delegating powers that involve “judgment or discretion” (with the exception of investment decisions under certain circumstances). However, several Illinois courts have established that trustees may delegate “purely ministerial” powers that do not require the exercise of judgment or discretion. The question of whether the authorized signers would be acting in a ministerial or discretionary capacity is highly fact-specific, and we do not have enough facts to enable us to provide guidance on which side of the ledger the answer would fall in this situation.

Perhaps a more important consideration, though, is that under the federal and Illinois financial privacy laws, if the trustee is not an authorized signer, it probably should not be granted access to the account statements and other account information, which could pose problems for the trustee. This would not be an issue if the trustee were simply to become an authorized signer, even if the trustee never intends to use this authority.

For resources related to our guidance, please see:

  • Trusts and Trustees Act, 760 ILCS 5/5.1 (“The trustee has a duty not to delegate to others the performance of any acts involving the exercise of judgment and discretion, except acts constituting investment functions . . . .”)
  • In re Trusteeship Under Last Will and Testament of Hartzell, 43 Ill.App.3d 118, 136–37 (2nd Dist. 1963) (“. . .  the trustee may, of course, employ agents or attorneys or others to perform merely ministerial duties connected with the trust. . . [but] a trustee cannot simply commit a ministerial matter to an attorney and relieve himself of all further supervision — the trustee should know what steps the attorney is taking and should use due care to have the attorney fulfill his employment.”)
  • Regulation P, 12 CFR 1016.10 (Limitations on sharing financial information with nonaffiliated third parties)
  • Illinois Banking Act, 205 ILCS 5/48.1 (Illinois law’s financial privacy provisions)