Topic: Payable on Death Accounts
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Can a payable on death (POD) beneficiary be named on an UTMA account?
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No, the Illinois Uniform Transfers to Minors Act (UTMA) does not allow for the naming of a POD beneficiary. Rather, the UTMA directs the custodian of the UTMA account to transfer the custodial property to the minor’s estate upon the minor’s death. For resources related to our guidance, please see: Illinois UTMA, 760 ILCS 20/21(a) (“The custodian…
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We have a customer that, to our knowledge, does not have a will. This customer has a CD with five people listed as payable on death (POD) beneficiaries. Among the beneficiaries the are two couples and one individual. Upon their death, this customer would like the proceeds of the CD to be divided into thirds between the two couples and the single person. If one of the members of the couples dies before the customer, the customer would like the surviving member of the couple to receive one third of the proceeds. Is this possible, or would the proceeds have to be divided equally among the remaining beneficiaries when the customer dies?
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We believe it is possible for your bank to set up an account with POD beneficiaries as you described, but your bank will have to enter into an amended or new CD account agreement with the customer that makes this intent clear. In general, the Illinois Trust and Payable on Death Accounts Act (“POD Act”)…
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We have a deceased customer who had held a CD and an IRA with three beneficiaries, two of whom have come to the bank to open inherited IRAs. The third beneficiary lives out-of-state and does not want to travel to the bank to set up his inherited IRA in person. This beneficiary’s attorney told us that all he must do is provide the bank with a notarized letter of direction. Is this accurate? The CD also has a payable on death (POD) beneficiary who lives out-of-state and does not want to travel to our bank. What are our options for these beneficiaries?
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We are not aware of any laws or regulations that would prevent your bank from remotely opening an inherited IRA or remotely distributing the proceeds of a POD account. Since the out-of-state IRA beneficiary will be a customer of your bank, you should follow your customer identification program (CIP) procedures for verifying the identity of…
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If we have personal information about payable on death beneficiaries for a deposit account, such as birth dates and social security numbers, and there is a security breach, may we contact the beneficiaries to let them know that their information has been compromised?
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Yes, we strongly recommend contacting deposit account beneficiaries to notify them of a data breach affecting their personal information. The Illinois Personal Information Protection Act requires notification of any Illinois resident when there is “unauthorized acquisition of computerized data” containing the resident’s personal information. “Personal information” includes an individual’s name in combination with a social…
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We have a deceased customer who had an IRA with her three sons named as beneficiaries. We need to open inherited IRAs for the sons, one of whom is incarcerated. Our Customer Identification Program (CIP) requires a primary and secondary form of identification. What steps do we need to take to verify the identity of an incarcerated individual? We were able to pull up a photograph of the incarcerated son on the Department of Corrections website using his inmate identification number. What more should we do? Our CIP does not cover this situation.
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We believe you may rely on the information posted on the Illinois Department of Corrections’ (IDOC) website, which is drawn from government records on file with the IDOC, for one form of government-issued identification for purposes of your customer identification program (CIP). Since your CIP policy requires two forms of government-issued identification, you may wish…
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Can a sole proprietorship account list a payable-on-death (POD) beneficiary?
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Yes, Illinois law permits a sole proprietorship accountholder to name a payable-on-death beneficiary. 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 business purpose accounts. For resources related to our guidance, please…
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Can a customer name a living trust as a payable on death (POD) beneficiary on her checking account? What is the procedure to execute this?
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Yes, a trust may be added as a beneficiary to a checking account. Under Illinois law, a checking account holder may convert a traditional account into a “payable on death” account by signing an agreement with their bank providing that on the account holder’s death, the account shall be paid to or held by a…
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An elderly customer opened a joint payable on death (POD) account with his sister a year ago. Recently, the customer became incapacitated and now has a court-appointed guardian. Can we add the guardian to the joint account? The guardianship order indicates that the guardian has authority to act on behalf of our customer with respect to the customer’s bank accounts. The guardian also is named as the POD account beneficiary (which occurred before he was appointed guardian). Can an account that has a guardian associated with it continue to have a beneficiary?
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Yes, we believe that you may add the guardian to the joint account. A guardian’s specific rights and responsibilities with respect to a ward are established through a court order when the guardian is appointed. In this case, you have indicated that the court order establishes the guardian’s authority to transact on the customer’s accounts.…
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In the new Illinois unclaimed property law, there is a requirement to include the name and last-known address of the beneficiary for “a life or endowment insurance policy, annuity contract, or other property where ownership vests in a beneficiary upon the death of the owner.” Would this requirement apply to payable on death (POD) and IRA beneficiaries?
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Yes, the reporting of beneficiary information applies to POD and IRA beneficiaries, as for other types of property for which “ownership vests in a beneficiary upon the death of the owner.” We contacted an attorney at the Illinois Treasurer’s office, who confirmed that this provision applies to POD and IRA beneficiaries. The State Treasurer’s intent…