Topic: Certificates of Deposit (CDs)
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One of our certificate of deposit (CD) account customers died seven years ago. The CD was payable on death (POD) to her grandson. However, the signature card for the CD stipulates that it is not to be paid out until he turns twenty-one, and he has not yet turned twenty-one. Can we swap out the deceased customer’s social security number for the grandson’s social security number? The beneficiary’s mother now is demanding that we release the CD funds to her, and the executor would like to close the customer’s estate.
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Simply replacing the original accountholder’s social security number with the beneficiary’s social security number would not fulfill your customer’s intent, which was to wait until the beneficiary turns twenty-one before distributing the CD's proceeds. In general, the Illinois Trust and Payable on Death Accounts Act (“POD Act”) requires that POD accounts be distributed to beneficiaries…
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We have a customer who owns a certificate of deposit (CD) jointly with her spouse. If she presents a final divorce judgment with an order awarding her the CD, can we rely on that to remove her spouse’s name from the CD? Or would it be better to have the spouse who was awarded the CD close the account and then open a new one?
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We believe you may rely on a final, non-appealable court order that awards the CD to one of the ex-spouses for either removing the other ex-spouse from the existing CD or closing the CD and opening a new one for the ex-spouse who was awarded the CD. In either case, your bank should retain a…
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We would like to revise the penalties on our certificates of deposit (CDs) that automatically renew. The increased penalty schedule will not take effect until after the CDs renew. Do we need to provide 30 days’ notice to our CD customers before implementing the increased penalties? As part of a promotion, we are also planning to offer a brand new type of CD that will have different penalties than our existing CDs. Do we need to provide any advance notice about that? The new CD product doesn’t have any customers yet.
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We believe you should include the increased penalty schedule in your prematurity notice, which generally must be sent at least 30 calendar days before the maturity of the existing CD accounts. However, we agree that you do not need to provide advance notice regarding the new type of CD accounts, because no customers have opened…
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Can we rely on a divorce settlement agreement to remove one of the spouse’s names from a joint certificate of deposit (CD)?
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No, we do not recommend relying on a divorce settlement agreement to remove one co-owner of a CD from the account. Generally, divorce settlement agreements must be approved by a court and incorporated into a final judgment. Until there is a final judgment, the terms of a settlement agreement are not binding. For resources related…
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A father and son co-signed on a $2500 loan. The loan is secured by a certificate of deposit that is solely owned by the father. We obtained an assignment of CD in connection with the loan. The loan is current. However, the son is now engaging in fraudulent activity in his personal checking account that has made his account overdrawn. Can we use the CD to offset the son’s overdrawn account?
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In our view, the bank may not use the CD to offset the son’s overdrawn account. Under Illinois law, the right of setoff can be asserted under the common law if there is “mutuality” of parties — where the deposit account is owned by the same party that owes the debt to the bank. Because…
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Following a merger with another bank, our bank kept its name. Some certificates of deposit issued by the other bank are set to automatically renew. Can we renew them using that bank’s name? Or do we have to issue new CDs in our name?
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In our view, you may permit the CDs to renew automatically in the original issuing bank’s name, subject to the discussion below. Under the Illinois Banking Act, the resulting state bank after a merger is considered the same business and corporate entity as each merging bank. Any written reference to a merging bank executed before…
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A county requested a 48-month certificate of deposit at our bank. Is that permissible in Illinois?
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We are not aware of any term limits under Illinois law, but the answer depends on the individual public agency’s investment policy. All public agencies must adopt written investment policies, including “guidelines regarding collateral requirements, if any, for the deposit of public funds” and “if applicable, guidelines for contractual arrangements for the custody and safekeeping…
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We have five certificates of deposit (CDs) owned by a trust. The original co-trustees of the trust, husband and wife, signed the signature cards for the CDs. They later amended the trust documents to remove the wife as co-trustee. Does the wife have any rights in the CDs?
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Because the wife has been removed as co-trustee, her rights as trustee have terminated, and she should not exercise control over the trust’s CDs. We recommend replacing the current signature cards for the CDs with new signature cards signed by the current co-trustees to reflect the amended trust terms.
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Our understanding is that the account agreement for a joint certificate of deposit does not have to be signed under the FDIC deposit insurance rules. Are there other reasons for recommending that we obtain all co-owners’ signatures on a joint certificate of deposit account agreement?
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Yes, we recommend that you obtain all owners’ signatures for a joint certificate of deposit. Obtaining all of the co-owners’ signatures will unquestionably bind all of them your bank’s terms and conditions for the CD. Ultimately, you might be able to argue that just one owner’s signature is necessary to bind all of the co-owners…
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Does Illinois have a minimum interest rate that must be charged on a loan secured by a CD?
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No, Illinois does not set a minimum rate spread for loans secured by certificates of deposit (CDs). Former Regulation Q set minimum rate spreads for such loans, but the Federal Reserve Board rescinded that requirement in 1986, and we are not aware of any similar requirements under Illinois law.