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When we open memorial/benefit accounts, we ask that an individual open the account in his or her name. We have an engagement letter that our lawyer drafted several years ago stating that the bank has no duties, responsibilities or obligations other than to accept the deposits and requiring the individual to hold the bank harmless for the consequences of any action or inaction that the bank takes in regard to the account. Is that the correct way to handle these accounts? – IBA Compliance Connection

IBA Compliance Connection

Your go to source for compliance!

When we open memorial/benefit accounts, we ask that an individual open the account in his or her name. We have an engagement letter that our lawyer drafted several years ago stating that the bank has no duties, responsibilities or obligations other than to accept the deposits and requiring the individual to hold the bank harmless for the consequences of any action or inaction that the bank takes in regard to the account. Is that the correct way to handle these accounts?

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When opening memorial and benefit accounts, we believe it is a best practice to ask the individuals establishing the accounts to obtain separate EINs to avoid a number of potential problems. For example, using a separate EIN with the memorial fund’s name in your account records should help to avoid confusion for IRS reporting and other purposes. It may be helpful to provide these customers instructions for obtaining an EIN, which is a simple and free process and can be done online.

As an aside, we note that certain charitable activities may trigger registration requirements with the Illinois Attorney General’s Charitable Trust Division under the Charitable Trust Act or the Solicitation for Charity Act. However, these laws do not impose any responsibilities on financial institutions holding charitable accounts.

For resources related to our guidance, please see:

  • IRS Online EIN Application Assistant (Permitting organizations to apply for EINs as Block/Tenant Associations, Community or Volunteer Groups, Memorial or Scholarship Funds, PTA/PTO or School Organizations, Social or Savings Clubs, Sports Teams and more, under “Additional Types.”)