Topic: Death of a Customer
-
When a deposit account owner has died, when should we report the deposit account as unclaimed property? Is it timed from the date of death or from the last indication of interest?
—
by
We believe that a deposit account whose owner has died should be reported as unclaimed property two years from the date of the owner’s last indication of interest. Generally, a deposit account is presumed abandoned under the Illinois Revised Uniform Unclaimed Property Act (Illinois RUUPA) if it is unclaimed by the owner “3 years after…
-
Our loan department is considering extending auto loans to minors with an adult co-borrower. Can we require the co-borrower to be the minor’s parent or guardian? What would happen if the adult co-borrower dies, leaving only the minor on the loan? Can we pull credit reports for or report negative credit information on a minor?
—
by
Requiring a Parent or Guardian to be a Co-Borrower Yes, we believe you may require the co-borrower for a loan to a minor to be the minor’s parent or guardian, as a minor cannot enter into a legally binding contract in Illinois. In Illinois, the general rule is that an agreement with a minor is…
-
A customer with a payable on death (POD) checking account has died, and we have not yet closed the account. The POD beneficiary is waiting to receive insurance checks for storm damage to the deceased customer’s home that occurred while she was still alive. The insurance company said that the checks will be made payable to the deceased customer. Can the POD beneficiary deposit these checks into the POD account once she receives them, or will she need to provide us with a small estate affidavit?
—
by
No, we do not believe that the beneficiary — and now owner — of a POD account may deposit checks made payable to the prior owner, and we do not believe a small estate affidavit would protect you from potential liability. Under the Illinois Trust and Payable on Death Accounts Act, unless otherwise agreed, the…
-
A customer with a trust account died, and their successor trustee obtained a new employer identification number (EIN) for the trust. The trust account was opened using the deceased customer’s social security number (SSN). Is it a best practice to close the account and open a new account with the trust’s new EIN for tax reporting purposes?
—
by
Yes, we recommend closing the trust account with the deceased customer’s SSN, opening a new account with the trust’s new EIN, and having the successor trustee sign a new signature card. The IRS requires a trust to obtain a new EIN if the trust changes to an estate, a living trust changes to a testamentary…
-
A customer who opened a beneficiary IRA at our bank believes that she needs to take a required minimum distribution (RMD). The original IRA owner died after 2020, before reaching the age of 70, and the beneficiary also has not yet reached the age of 70. The beneficiary is only a few years younger than the deceased owner, is not their spouse or minor child, and is not disabled or chronically ill. Is the beneficiary required to take an RMD at this time?
—
by
We believe that the beneficiary would be considered an “eligible designated beneficiary” under recent changes to the Internal Revenue Code, which means they have two options for taking distributions from an inherited IRA. As described in more detail below, the option they choose determines whether and when they must begin taking RMDs. The Setting Every…
-
A borrower died and their mortgage loan is now in default. The deceased borrower’s spouse resides in the home and is in title to the property but is not a borrower on the loan. We are aware that we cannot file a foreclosure action until the loan is 120 days delinquent. Are we required to send a notice of acceleration after the third missed payment, and can you provide a sample of such a notice?
—
by
Whether a notice of acceleration is required generally depends on the terms of your loan agreement. However, if the mortgage loan is a “high risk home loan” as that term is defined in the Illinois High Risk Home Loan Act, you are required by statute to deliver a notice to the borrower informing them of…
-
A customer requested a change of beneficiary for a payable on death (POD) account, and we mailed them a change in beneficiary form. Before we received the completed form, the customer died. A day later, we received in the mail the customer’s completed form designating a new beneficiary for the account. Who is the rightful beneficiary, the one in our system or the one on the form?
—
by
Whether you have the authority to accept the change in beneficiary form depends on whether your bank knew of the POD account holder’s death before receiving the form. Also, if different beneficiaries are making conflicting claims to a POD account, your bank may wish to take advantage of an Illinois law that authorizes you to…
-
We have a customer who is a designated beneficiary (but not an “eligible designated beneficiary”) of an inherited IRA. The IRA owner was the customer’s father, who died in 2020 after taking his required minimum distribution (RMD) for 2020. Our understanding was that under the 2021 IRA rules, our customer had ten years to empty the inherited IRA — either by taking annual distributions or a lump sum before the ten-year deadline. However, we recently viewed a webinar indicating that when an IRA owner dies in 2020 (or later) after reaching their required beginning date for taking RMDs, their designated beneficiary must take annual distributions and cannot wait to take a lump sum. Will our customer be penalized for not taking an annual distribution in 2021, and must they begin taking annual distributions in 2022?
—
by
No, we do not believe your customer will be penalized for not taking a distribution in 2021 or be required to begin taking annual distributions in 2022. We do not believe that the IRS’s IRA rules require designated beneficiaries to take annual distributions from inherited IRAs. IRS Publication 509-B for use in preparing 2021 returns…