While Illinois law does not expressly prohibit this practice, we do not recommend permitting an LLC or other business entity to establish a POD account. The LLC will never trigger the POD provisions because LLCs do not die, even if all of the members of the LLC have died, which creates uncertainty for the bank holding the POD account.

The Illinois Trust and Payable on Death Accounts Act limits a financial institution’s liability when it distributes a POD account to the beneficiary “upon the death of the last surviving trustee or holder.” If the POD is held by an LLC, that limitation on liability would not necessarily protect your institution; even after the sole member of the LLC dies, the LLC’s existence would continue in perpetuity (unless the LLC’s Articles of Organization state otherwise or the LLC otherwise is dissolved). Due to that uncertainty, we recommend that financial institutions permit only natural persons to establish POD accounts.

We should note that a sole proprietorship could establish a POD account, as the sole proprietorship does not exist separately from its owner. See this Q&A for more information on this point.

For resources related to our guidance, please see:

• Illinois Trust and Payable on Death Accounts Act, 205 ILCS 625/10 (“Upon the death of the last surviving trustee or holder of the account, the institution that maintains the account shall distribute the proceeds to the beneficiary or beneficiaries designated in the agreement controlling the account without further liability. . . .”)

• Limited Liability Company Act, 805 ILCS 180/5-5(a)(5.5) (“The duration of [a] limited liability company . . . shall be perpetual unless otherwise stated.”)