Topic: Trusts
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Our bank has a separate trust department. When an individual has both trust accounts and deposit accounts at our bank, can our trust department share information about that customer’s trust transactions with our BSA officer? Would we be required to inform our trust customers about this information sharing? Does it create any privacy concerns?
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Yes, your bank’s trust department may share information about customer accounts and transactions with your bank’s BSA officer without notifying the customers or raising privacy issues. Illinois and federal financial privacy laws limit the sharing of customer information with third parties, but they do not prohibit the sharing of customer information with other bank employees…
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Can a customer change her IRA beneficiaries to designate two children and a supplemental trust in equal shares?
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Yes, an IRA owner can name more than one beneficiary, and trusts may be beneficiaries. To effect the change, the owner should fill out a beneficiary change form, a sample of which is included in our resources below. For resources related to our guidance, please see: IRS Publication 590-B — Distributions from Individual Retirement Arrangements (IRAs)…
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We have several land trusts for which the bank is trustee. We charge nominal annual service fees, which many of the beneficiaries fail to pay. Can we exercise a right of setoff against the trust accounts? Or do you have any other suggestions for paying these fees? Our land trust agreements provide for an unsecured lien for unpaid annual trust fees. The land trusts do not hold any deposits at our bank.
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We do not believe that your bank may exercise a right of setoff in this situation. Setoff rights arise from mutual debts between parties, and in the bank context they apply primarily when a bank holds a borrower’s deposit, such as in the form of a checking account or certificate of deposit. Here, the land…
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We have a payable on death (POD) account for which the owner died almost five years ago. The owner’s daughter was named as the POD beneficiary. The daughter lives in a nursing home and has not been able to sign a new signature card confirming that she is the account owner. She has not made any transactions on the account and does not hold any other accounts at our bank. Do we need to report the account as abandoned property, since there has not been any activity on the account since the date of the original owner’s death?
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It depends. You are not required to report the POD account as unclaimed property to the Illinois Treasurer provided that your bank creates and maintains documentation confirming the account owner’s indication of interest in the account. The current Illinois unclaimed property law does not treat an account as abandoned if the owner has “indicated an…
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Are contingent beneficiaries allowed on payable on death (POD) accounts in Illinois? Since the Illinois Trust and Payable on Death Accounts Act does not provide for contingent beneficiaries, does this mean that they are not allowed under Illinois law?
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We believe that a POD account can provide for contingent beneficiaries, if this intent is made clear in the account agreement with your customer. In general, the Illinois Trust and Payable on Death Accounts Act (“POD Act”) requires that POD accounts be equally distributed to beneficiaries on the death of the last surviving accountholder, but…
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We offer traditional and Roth individual retirement accounts (IRAs). We provide general information about the types of IRAs we offer, and the customer chooses which type of IRA they will be opening. We do not charge a fee or commission when an IRA account is opened, although we may charge a fee when the IRA account is closed, for example when it is rolled over to another institution. Are we subject to the Department of Labor’s Fiduciary Rule?
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No, we do not believe that your bank is subject to the Fiduciary Rule in the circumstances you have described. The Fiduciary Rule’s revised definition of a “fiduciary” greatly expands the scope of the rule to include any person who (1) renders investment advice (2) for a fee. The rule should not apply when your…
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We have a customer who would like to name a trust as the payable on death (POD) beneficiary on her individual certificate of deposit (CD). Does Illinois law allow this?
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Yes, a trust may be added as a beneficiary to a CD account. Under Illinois law, an account becomes a “payable on death” account when the accountholder signs an agreement providing that on the accountholder’s death, the account will be paid to or held by a designated beneficiary. The law defines the term “account” to…
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We title certificate of deposit (CD) accounts that have a payable on death (POD) beneficiary with the word “trustee” next to the owner’s name. Do we have to do this? When we pay out such accounts, it causes problems to issue checks to a “trustee” when there is no formal trust.
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No, we do not recommend including the words “trustee” or “trust” in a POD account title. We are not aware of any specific titling requirements for POD accounts in Illinois law. However, POD accounts are separate and distinct from trust accounts, and the term “trustee” implies the existence of a trust relationship. For resources related to our guidance,…
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We still are trying to determine whether we are a fiduciary. If we are, what is the impact on the bank? As a fiduciary, what does the bank need to do?
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If considered a fiduciary under the Fiduciary Rule, your bank and its employees would be required to comply with the Employee Retirement Income Security Act (ERISA) fiduciary standards, which include putting customers’ best interests first and avoiding self-dealing, conflicts of interest, imprudence and disloyalty. Importantly, your bank and its employees would not be permitted to…