It does not appear that you have sufficient information to determine who may close the accounts or to determine whether the accounts are held in the trust or the customer’s estate. As a result, we do not recommend closing the accounts based on the trustee’s request alone.
The Illinois Probate Code authorizes pour-over wills in which the testator bequeaths their property to a trustee of a trust, and “unless the testator’s will provides otherwise,” the testator’s property is governed by the terms of the trust instrument. However, the Illinois Trust Code requires that certain expenses must be paid (such as the costs of administration of the settlor’s estate and funeral expenses) before the proceeds of a pour-over trust may be distributed. If your customer’s estate does not have sufficient funds to pay these expenses, the estate (as represented by the executor) may have the right to collect those funds from the trust.
Because the trustee’s right to the customer’s funds is subject to the payment of certain estate expenses, we believe that there is a possibility that the executor may have a conflicting claim to the funds held in the deposit accounts that the trustee is attempting to close. In other words, if your bank closes the accounts without the knowledge or permission of the executor, your bank may be exposed to conflicting claims over the account funds between the trustee and executor.
If the value of the customer’s entire estate does not exceed $100,000 and does not contain real estate held in the customer’s name alone, an individual who presents a small estate affidavit would be authorized to close the accounts — and your bank is protected from liability when relying on a small estate affidavit to the same extent as if dealing with a duly appointed estate representative. However, a small estate affidavit may be used only in cases where no letters of office have been issued or requested from a probate court and there are no disputes regarding the will or heirship of the customer.
Consequently, we recommend waiting until a party authorized by the probate court to administer the customer’s estate or presenting a small estate affidavit comes forward to close the accounts.
For resources related to our guidance, please see:
- Probate Act of 1975, Article IV, Wills, 755 ILCS 5/4-4 (“By a will signed and attested as provided in this Act a testator may bequeath or appoint real and personal estate to a trustee of a trust evidenced by an instrument . . . which is in existence when the testator’s will is made and which is identified in the testator’s will, even though the trust is subject to amendment, modification, revocation or termination. Unless the testator’s will provides otherwise, the estate so bequeathed or appointed shall be governed by the terms and provisions of the instrument creating the trust, including any amendments or modifications in writing made at any time before or after the execution of the testator’s will and before, or after if the testator’s will so directs, the death of the testator.”)
- IICLE, Trust Administration 2019 Edition, Chapter 1 — Creation of the Trust (“The use of a pourover will to fund a nontestamentary trust is an extremely common estate planning device that allows an inter vivos trust to be the primary dispositive vehicle. The trust receives the testator’s net probate estate after payment of claims, taxes, and expenses and also receives directly the proceeds of insurance and employee benefit plans.”)
- Illinois Trust Code, Article 5, Creditor’s Claims; Spendthrift and Discretionary Trusts, 760 ILCS 3/505(5) (“After the death of a settlor, and subject to the settlor’s right to direct the source from which liabilities will be paid, the property of a trust that was revocable at the settlor’s death is subject to claims of the settlor’s creditors, costs of administration of the settlor’s estate, the expenses of the settlor’s funeral and disposal of remains, and statutory allowances to a surviving spouse and children to the extent the settlor’s probate estate is inadequate to satisfy those claims, costs, expenses, and allowances. Distributees of the trust take property distributed after payment of such claims
(A) sums recovered by the personal representative of the settlor’s estate must be administered as part of the decedent’s probate estate, and the liability created by this subsection does not apply to any assets to the extent that the assets are otherwise exempt under the laws of this State or under federal law;
* * * * *
(C) Sections 18-10 and 18-13 of the Probate Act of 1975, detailing the classification and priority of payment of claims, expenses, and taxes from the probate estate of a decedent, or comparable provisions of the law of the deceased settlor’s domicile at death if not Illinois, apply to a revocable trust to the extent the assets of the settlor’s probate estate are inadequate and the personal representative or creditor or taxing authority of the settlor's estate has perfected its right to collect from the settlor's revocable trust.”)
- Illinois Trust Code, Article V, Creditor’s Claims; Spendthrift and Discretionary Trusts, 760 ILCS 3/505(6) (“After the death of a settlor, a trustee of a trust that was revocable at the settlor’s death is released from liability under this Section for any assets distributed to the trust’s beneficiaries in accordance with the governing trust instrument if: (A) the trustee made the distribution 6 months or later after the settlor’s death; and (B) the trustee did not receive a written notice from the decedent’s personal representative asserting that the decedent’s probate estate is or may be insufficient to pay allowed claims or, if the trustee received such a notice, the notice was withdrawn by the personal representative or revoked by the court before the distribution.”)
- Probate Act of 1975, Article VI, Probate of Wills and Issuance of Letters of Office, 755 ILCS 5/6-8 (“When a will is admitted to probate, letters testamentary shall be issued to the executor named in the will if he qualifies and accepts the office, unless the issuance of letters is excused.”)
- Probate Act of 1975, Article VI, Probate of Wills and Issuance of Letters of Office, 755 ILCS 5/6-15 (“The executor or the administrator with the will annexed shall administer all the testate and intestate estate of the decedent.”)
- In re Estate of Muhammad, 165 Ill.App.3d 890, 893 (1st Dist. 1987) (“In making payment to a person other than the depositor, the bank acts at its peril and is liable to the depositor if the claim is not valid.”)
- IICLE, Elements of Illinois Law: Estate Planning and Probate Administration 2020 Edition, Chapter 2 — Probate Administration (“As an initial matter, it is necessary to identify title to the decedent’s assets in order to determine whether probate is necessary. Only assets held in the decedent’s name alone require probate. After identifying the probate assets, it must be decided whether summary administration or a small estate affidavit can be used to collect and distribute the assets. If the value of the probate assets exceeds $100,000 or includes real estate, neither the small estate affidavit nor summary administration is available. Under these circumstances, an estate must be opened to administer the assets properly.”)
- Probate Act of 1975, Article XXV, Small Estates, 755 ILCS 5/25-1(d) (“Any . . . financial institution who acts in good faith reliance on a copy of a document purporting to be a small estate affidavit that is substantially in compliance with subsection (b) of this Section shall be fully protected and released upon payment, delivery, transfer, access or issuance pursuant to such a document to the same extent as if the payment, delivery, transfer, access or issuance had been made or granted to the representative of the estate.”)
- IICLE, Litigating Disputed Estates, Trusts, Guardianships, and Charitable Bequests, 2020 Edition, Chapter 13 — Overview of the Probate Process (“A small estate affidavit can be used when the value of the personal estate of the decedent is less than $100,000. Id. By statute, the small estate affidavit permits a person, corporation, or financial institution holding personal property of the decedent to transfer that property to the decedent’s proper heirs or legatees, as the case may be. Upon payment, delivery, or transfer of the property in accordance with a properly executed affidavit, the person, corporation, or financial institution delivering such property is released to the same extent as if the person made payment to the representative of the decedent’s estate.”)
- Probate Act of 1975, Article XXV, Small Estates, 755 ILCS 5/25-1(b)(6) (“Small Estate Affidavit . . . The gross value of the decedent’s entire personal estate, including the value of all property passing to any party either by intestacy or under a will, does not exceed $100,000. (Here, list each asset, e.g., cash, stock, and its fair market value.)”)
- Probate Act of 1975, Article XXV, Small Estates, 755 ILCS 5/25-1(b) (“Small Estate Affidavit. I, (name of affiant), on oath state: . . . 5. No letters of office are now outstanding on the decedent’s estate and no petition for letters is contemplated or pending in Illinois or in any other jurisdiction, to my knowledge; . . .”)
- Probate Act of 1975, Article XXV, Small Estates, 755 ILCS 5/25-1(b) (“Small Estate Affidavit. I, (name of affiant), on oath state: 10. . . . (c) Affiant is unaware of any dispute or potential conflict as to the heirship or will of the decedent.”)