Topic: Minor 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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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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We have a checking account for a customer who recently passed away. We became aware of the death a month after it occurred. There are two beneficiaries on the account: the deceased customer’s adult son and the daughter of his second wife, who is a minor. There is a dispute between the beneficiaries’ families, and we are trying to protect the bank from liability. How do we handle distribution to the minor? Is the minor’s mother required to be appointed as guardian of her property? If we have to wait for court documents, do we have to wait to disburse the other half of the funds to the adult son? Additionally, there are ACH debit transactions that posted after the customer’s death. These transactions are consistent with patterns on the account when the customer was alive, but we are not sure whether the transactions belong to the deceased customer or his adult son, as they both have the same name.
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We believe that if the designated beneficiaries are making conflicting claims as to the relevant payable on death (POD) account, your institution should utilize the protections available under the Illinois Trust and Payable on Death Accounts Act and refuse to distribute the account proceeds until the beneficiaries provide a court order directing distributions from the…
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Are there any age restrictions on issuing debit cards to minors? We have received a request to open two separate joint accounts with debit cards for minors aged ten and twelve, for which their parent would be a joint owner. Currently, we offer student checking accounts for individuals aged fifteen to twenty-one, and for those under eighteen, we require a parent or guardian to be a joint owner on the account. If we grant an exception to our usual policy and open these accounts, what legal issues should we be concerned about? Would the parent assume liability for overdrafts, and are there any concerns about unauthorized activity if the minor allows a friend to use the debit card and the parent claims the use was unauthorized?
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We are not aware of any age restrictions on issuing debit cards in Illinois or federal law, but we recommend contacting your debit card issuer and reviewing any agreements for age limitations. Additionally, we caution you against making individual exceptions to your policies and procedures. If you decide to open these accounts, you may wish…
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We are an Illinois savings bank considering offering minor savings accounts. We would like to provide a gift at account opening, with the exact gift (cash or swag, for example) determined by spinning a wheel that lands on a certain prize. Can minors open savings accounts in their name if they are old enough to sign the signature card? Also, is there a dollar limit on account opening gifts, and would we need to describe the gift in our account disclosures and report it to the IRS for tax purposes?
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Yes, minors are permitted to open savings accounts. While we are not aware of a dollar limit on account opening gifts, Regulation DD’s disclosure requirements apply if the gift is worth more than $10, and IRS reporting requirements apply to gifts valued at $10 or more and $600 or more. Both the Illinois Savings Bank…
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Since you advised that a bank can open a certificate of deposit as a minor account solely in the name of the minor, what is the difference between doing that and opening an Illinois Uniform Transfer to Minors Act (UTMA) account?
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An Illinois UTMA account is a custodial account that allows funds to be set aside for a minor while restricting the minor’s use of the funds. Conversely, a minor account functions like an ordinary account opened for an adult, since the Illinois Banking Act provides that such accounts are binding on the minor as if…
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What is the legal age a person must be to cosign for a loan? We have a 16-year-old who would like to cosign a vehicle loan with their grandparent, but we are not sure if the agreement would be legally binding.
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Generally, a person must be eighteen in Illinois to sign a contract. If a minor cosigns a vehicle loan with their grandparent, the loan agreement would not be enforceable against the minor cosigner until they reach the age of eighteen and ratify the agreement. In Illinois, the general rule is that minors cannot enter into…