We recommend reviewing your account agreement for the jointly held account to determine whether it grants a right of setoff that allows your bank to use the account funds to pay the debt of any account owner. If so, we believe you can exercise a right of setoff against a joint account where only one owner owes your bank a debt.

In Illinois, the right of setoff can arise either contractually (when an agreement provides for a right of setoff) or under common law (when there is “mutuality” of parties — the funds are owned by the same party that owes a matured debt to the bank). In the case of a joint account where only one account owner owes the bank a debt, mutuality of the parties does not exist. However, you may have a contractual right of setoff, and Illinois courts have held that banks may set off the debts of either one of a joint account’s owners against a joint account as specified in the joint account agreement.

Regarding an account held with a minor child, the Illinois Joint Tenancy Act does not prevent a minor from jointly owning an account with another party, and no federal laws prohibit minors from opening deposit accounts. Also, the OCC has stated that there are no federal prohibitions on minors opening deposit accounts, which are governed by state contract law. (The Illinois Banking Act expressly authorizes state banks to open bank accounts for minors, but because your bank is a national bank, that provision is not directly relevant here.)

In Illinois, courts have held that contracts with minors are voidable by the minor on attaining the age of majority (which is eighteen in Illinois), although such contracts are not void outright. However, if a minor opens a joint account with a legal guardian or parent over the age of majority, we believe the account agreement would be enforceable against the adult joint owner. Consequently, we believe your bank would be able to enforce a contractual right of setoff from a joint account if at least one of the joint owners is an adult.

For resources related to our guidance, please see:

• Symanski v. First Nat. Bank of Danville, 242 Ill.App.3d 391, 396–397 (4th Dist. 1993) (“There are two bases on which defendant could assert a right of setoff . . . Under common law, a bank has the power to apply the deposit to the payment of such depositor’s indebtedness only when there are mutual demands and debts between the parties, and this right of setoff arises at the time the depositor’s indebtedness to the bank has matured. The general rule in Illinois is that a bank may apply its depositor’s account for a debt he owes to the bank. The application of the deposit, which is called a setoff, is only proper when the debts are mutual between the parties.”)

• Fisher v. State Bank of Annawan, 163 Ill.2d 177, 181 (1994) (“Plaintiff argues . . . that the bank could not set off Robert’s indebtedness against the CDs because no mutuality existed. However, this inquiry into equitable setoff is irrelevant where a contractual basis for a setoff exists. The contract between plaintiff, his sons, and the defendant bank provides an independent basis for a setoff.”)

• Selby v. DuQuoin State Bank, 223 Ill. App. 3d 104, 109 (5th Dist. 1991) (“[A] plain reading of the set-off provision of the signature-card agreement indicates to this court that the Bank asserted a right to set off each depositor’s debts or obligations owing to the Bank against the deposit account and that each depositor recognized this right of the Bank to set off either depositor’s debts against the joint account. . . . because the joint depositors, Smith and plaintiff, agreed that the Bank’s right of setoff applied to the joint account for a debt or obligation owing by either of them, the Bank’s setoff of these funds was proper.”)

• Joint Tenancy Act, 765 ILCS 1005/2(a) (“When a deposit in any bank . . . transacting business in this State has been made or shall hereafter be made in the names of 2 or more persons payable to them when the account is opened or thereafter, the deposit or any part thereof or any interest or dividend thereon may be paid to any one of those persons whether the other or others be living or not, and when an agreement permitting such payment is signed by all those persons at the time the account is opened or thereafter the receipt or acquittance of the person so paid shall be valid and sufficient discharge from all parties to the bank for any payments so made.”)

• OCC, Guidance to Encourage Financial Institutions’ Youth Savings Programs and Address Related Frequently Asked Questions (February 24, 2015, updated November 9, 2017) (“1. Are there restrictions on minors opening savings accounts? How old must a person be to open a savings account without a parent or guardian serving as the custodian or co-owner on the account?

  No federal law prohibits minors from opening savings accounts. Rather, a deposit account relationship is based on a contract governed by state law. In general, minors are deemed to not have the legal capacity to enter into a contract, including opening an account at a financial institution, meaning that a contract with a minor is potentially ‘voidable.’ However, some states specifically allow a minor to open a savings account. For example, the State of Washington permits a minor to enter into a valid and enforceable contract for a deposit account with a financial institution. States also have different legal definitions of ‘minor.’

  Whether it is legally permissible for an institution to open an account for a minor without requiring a responsible adult to be the custodian or co-owner is a determination that a financial institution should make in consultation with legal counsel.”)

• Illinois Banking Act, 205 ILCS 5/45.1 (“A state bank may accept deposits made by a minor and may open an account in the name of such minor and the rules and regulations of such bank with respect to each such deposit and account shall be as binding upon such minor as if such minor were of full age and legal capacity.”)

• Fletcher v. Marshall, 260 Ill. App. 3d 673, 675 (1994) (“A contract of a minor is not void ab initio, but merely voidable at the election of the minor upon his attaining majority.”)

• Thornhill v. Midwest Physician Ctr., 337 Ill. App. 3d 1034, 1052 (2003) (“In Illinois the age of majority is 18 years old.”)

• Joint Tenancy Act, 765 ILCS 1005/3 (“Except as otherwise provided in this Act, all joint obligations and covenants shall be taken and held to be joint and several obligations and covenants.”)