Topic: Payable on Death Accounts
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A customer would like to name her personal trust as the beneficiary of her payable on death (POD) account. Is this permissible?
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Yes, we believe an individual may name their personal trust as the beneficiary of their POD account. The Illinois Trust and Payable on Death Accounts Act allows an individual to sign an agreement with a bank “providing that on the death of the last surviving person designated as holder the account shall be paid to…
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Does a payable on death (POD) beneficiary designation affect our contractual right of setoff with respect to a loan to the deceased party? In other words, can we still set off a customer’s account if the funds within the account immediately become the property of someone else after the customer’s death? We believe we can because our loan contracts identify “death” as a means of considering the loan in default for purposes of accelerating the balance due, and the relevant checking account is owned solely by the deceased borrower.
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We do not believe that your institution can assert a right of setoff against a deposit account with a POD designation after the account owner’s death. You may be able to assert a contractual right to the account funds if your deposit account or loan agreements specifically authorize your right of setoff in these circumstances,…
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Are we required to obtain the social security number of a beneficiary on a payable on death (POD) account?
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No, you are not required to obtain the social security number of a POD beneficiary. Under the Customer Identification Program (CIP) regulations, your CIP procedures must, at a minimum, include obtaining and verifying certain identifying information about a customer, including the customer’s taxpayer identification number. However, since the CIP regulations define a “customer” as a…
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Are we required to notify named beneficiaries of a payable on death (POD) account after learning of a customer’s death? Would a POD account beneficiary become an “apparent owner of property presumed abandoned” under the Illinois Revised Uniform Unclaimed Property Act (Illinois RUUPA)?
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We are not aware of any law that would require you to notify POD account beneficiaries after learning of a customer’s death. However, we recommend reviewing your account agreements to determine whether they require notification to the POD account beneficiaries. Further, such beneficiaries would be considered “apparent owners” under the Illinois RUUPA. The Illinois Trust…
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Can a sole proprietorship account have a payable-on-death beneficiary?
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Yes, a sole proprietor may name a payable-on-death beneficiary for their account. The Illinois Trust and Payable on Death Account Act provides that accountholders may designate payable-on-death beneficiaries for “any account, deposit, certificate of deposit, withdrawable capital account or credit union share in any institution.” There is no exclusion for sole proprietorship accounts or other…
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We discovered that our treasurer added herself as the POD beneficiary on her uncle’s account at our bank shortly before he died. We immediately removed the treasurer from the account and did not distribute the account funds to her. We plan to fire the treasurer very soon and will file a suspicious activity report (SAR). Is there anything else we should do, such as notifying the IDFPR and our primary federal regulator, the FDIC?
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We do not believe that you are required to notify the FDIC or the IDFPR of the employee’s activity. The FDIC’s regulations require you to notify the FDIC regional office when filing a SAR for “violations requiring immediate attention, such as when a reportable violation is ongoing.” In this case, the violation is not ongoing,…
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We have a new forms provider that told us it does not support per stirpes designations for payable on death (POD) accounts in Illinois. However, it offered this position could change if we can provide a legal citation indicating that such designations should be supported in Illinois. Does Illinois recognize per stirpes designations for POD accounts?
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Yes, we believe that per stirpes designations for POD accounts are recognized in Illinois — provided the account agreements clearly indicate that the account funds will be distributed “per stirpes” or by “right of representation.” Illinois courts have held that “[t]he words per stirpes denote a taking by right of representation of that which an…
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How should we distribute the funds in an account belonging to a deceased customer whose sole payable on death (POD) beneficiary is their thirteen-year-old minor child? The account balance is less than $500. The customer was divorced from the minor child’s other parent. What documentation does the surviving parent need to show guardianship?
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We believe that you may deliver the funds in your deceased customer’s account to the minor beneficiary’s surviving parent if they provide the bank with an affidavit signed by the surviving parent stating that (1) the minor’s estate does not exceed $10,000, (2) no representative has been appointed for the minor’s estate, and (3) the…
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In Illinois, can a trust be named as a beneficiary on a payable on death (POD) account? If so, can a trust be named as a beneficiary on a business account held by an entity other than a sole proprietorship?
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Under Illinois law, a trust may be named as a beneficiary on a POD account. However, we do not believe that a business entity (such as a corporation or an LLC) may designate a POD beneficiary of any kind. The Illinois Trust and Payable on Death Accounts Act (“Act”) allows “one or more persons opening…