Topic: Joint Accounts
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Our loan department is considering lending to minors if they have a parent or guardian as a co-borrower. Can we limit this lending to loans with a security interest in an automobile? If title to the vehicle is in the minor’s name, what issues could we run into if we try to collect on the note or repossess the vehicle?
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Limiting Minor Borrowers to Auto Loans In Illinois, the general rule is that minors cannot enter into legally binding contracts, since an agreement with a minor is voidable by the minor until they reach the age of majority (which is eighteen in Illinois). There are some exceptions to this general rule, as in cases of…
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An elderly couple has a joint account at our bank, and their daughter has been appointed as their guardian. We have received two court orders establishing the daughter as the plenary guardian of her mother’s estate and of her father’s estate. However, our account onboarding platform is sending an alert that a guardian can be added only to an individually owned account. Is it permissible to add a guardian to a joint account if they have been appointed as guardian for both account owners?
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Yes, we believe it is permissible to add a guardian to a joint account where the guardian has been appointed for both owners of the joint account. We also are not aware of any prohibitions on adding a guardian to a joint account who has been appointed for only one joint owner — but such…
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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?
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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…
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Are there any restrictions on exercising a right of setoff from a jointly owned deposit account where only one of the account owners owes the bank a debt? For example, if a customer is the sole owner of an overdrawn deposit account, can we exercise a right of setoff against another account the customer has at our bank that is jointly owned with their spouse, child, or anyone else?
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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…
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What is the most common practice for handling requests to remove a living joint account holder from a demand deposit account? We usually close the account and open a new one, but we heard that some banks allow removal of a joint account holder if the proper paperwork is signed by all of the co-owners. Are there any benefits to using one method over the other? We are concerned about unauthorized transactions and disagreements between co-owners if we allow removal without closing the account.
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We believe that there are more benefits to your bank’s approach when ownership of a joint account changes — closing the account and opening a new account, with a new account number and new account agreement signed by the owner. As you have found, we are aware that some banks will remove a co-owner from…
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We have a customer who has three joint accounts: one with her niece, one with her nephew, and one with both her niece and nephew. A court has appointed the customer a temporary guardian for a disabled person. Would we have any legal liability to the joint co-owners if the guardian acts on these accounts, for example removing funds or closing the accounts? The accounts require just one signature to act.
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We believe that it is possible for joint co-owners to hold a bank liable for allowing a temporary guardian of the estate to unilaterally act on a joint account without a court order determining that joint funds must be released to support and maintain the ward. Under the Illinois Probate Act, a court-appointed temporary guardian…
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Does state or federal law limit the number of joint account holders that can co-own a checking or savings account? A customer wants to open a “family account” jointly-owned by all five members of their family.
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No, we are not aware of a law or regulation that would limit the number of joint account holders that can co-own a deposit account in Illinois. Accordingly, we believe whether to open a joint account with five co-owners is a business decision for your bank. For resources related to our guidance, please see: Joint…
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A husband and wife with separate trust accounts want to open a checking account with their trusts listed as owners as tenants in common. The account would be opened using only the tax ID of the husband’s trust, and checks made out to either trust would be deposited into the account. Each trust would own a percentage of what is in the account, and when either the husband or wife dies, their trust’s assets would go to their individual beneficiaries. Can we set up a checking account like this, and would there be any negative tax implications?
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No, we would not recommend allowing two separate trusts to open a joint checking account, as this arrangement could risk the commingling of funds between two separate entities. Further, distributions from such an account could be susceptible to dispute by each trust’s respective beneficiaries, and this arrangement could cause a trustee to breach their fiduciary…
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When should a deceased customer who is the primary account holder on a joint account be removed from the account for tax reporting purposes? Is there a specific timeframe for completing this process?
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No, we are not aware of any law or regulation that requires a deceased owner of a joint account to be removed from the account within a specific timeframe. However, we recommend removing the deceased customer from the joint account as soon as you have confirmation of the death. Under Illinois law, when a joint…