An Alternative to Joint Tenancy Bank Accounts

New Law Allows Illinois Banks to Create Convenience Accounts

By Richard Magnone © 2010

On January 1, 2010, a new law, the Illinois Banking Convenience Account for Depositors Act goes into effect throughout Illinois.  The law allows banks to offer convenience accounts to their customers.

The Problem

Prior to the passage of the new law, many people engage in the unsophistocated practice of adding a friend or relative's name as a joint owner to a bank account in order for that person to be able to assist them with bill paying or to have ready access to cash in the case of an emergency.  This well intended course of action, however, can result in a number of unintended consequences.  Because the person added to the bank account becomes a joint owner, the account will be subject to the claims of the creditors of the person added to the account.  In addition, from the IRS's perspective, a gift may have been made and that gift might be subject to estate tax or use of the unified credit.  Finally, the account will pass to the joint owner upon the death of the initial account owner which might not be in accordance with the account owner's plans.  In addition, the situation becomes even more confusing when the person assisting the original owner also holds a power of attorney.

A New Solution

Under the new law, an account owner to designate a "convenience depositor" who can access the account and make deposits to and withdrawals from the account.  The law specifically provides that deposits to the account do not affect the title to the money deposited into the account and the deposits will not be considered gifts made to the convenience depositor.  In addition, any deposits made to the account or any interest on any deposits made by either the account owner or the convenience depositor will be credited to and be the property of the original account owner. 

A Simple Tool

Convenience accounts take the guesswork out of joint bank accounts.  By properly setting up a convenience account, an account holder can have the flexibility of adding a convenience depositor to assist with banking transactions and avoid the confusion created in determining if the account was meant to be a joint tenancy or a gift.  Only time will tell if convenience accounts become commonnly used in Illinois.  The law has a sunset provision in 2015.

How to Get Started

We provide assistance in most aspects of estate planning.  If you would like to consult with us about any aspect of your estate plan, please contact us.  To get this process started, please feel free to contact Richard Magnone via email or by phone at 773-399-1122.  We are generally willing to have a short (5 to 15 minutes) initial discussion over the telephone to determine if we can assist in your situation and to determine if we might be an appropriate match to work with you. Face to face Initial consultations are by appointment only and a consultation fee is generally charged.