Reda | Ciprian | Magnone, LLC

Convenience Bank Accounts in Illinois Estate Planning

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 a new type of bank account, known as a convenience account, to their customers.

The Problem

Prior to the new law’s passage, many people engage in the somewhat unsophisticated and dangerous practice of adding, for their “convenience”, a friend or relative’s name to a bank account as a joint owner to allow that added person access to the bank account to assist them with with activities like bill paying or to allow for ready access to cash in the case of an emergency.  Like all forms of joint tenancy estate planning, this well intended plan 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 added person’s creditors.  From the IRS’s perspective, the addition of a joint owner may signal that a gift has been made and that gift may be subject to gift tax or use of the account owner’s unified credit.  Finally, the account will now pass to the joint owner upon the initial account holder’s death which may not be in accordance with the account owner’s overall estate plan.  The complexity of the situation becomes even greater when the person added to the bank account who is assisting the original owner is also an agent for the account owner pursuant to a power of attorney.

A New Solution

Under the new law, a bank 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, without question, credited to and will 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 commonly 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 or so 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.

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Reda | Ciprian | Magnone, LLC
8501 W. Higgins Suite 440
Chicago, Illinois 60631

Call: (773) 399-1122
Fax: (773) 399-1144

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Reda | Ciprian | Magnone, LLC serves the public and other Illinois attorneys by providing timely, accessible information about Illinois law, specifically, estate planning, probate, entity formation, corporate, landlord-tenant, real estate & other areas of the law. Our firm has assisted clients as far away as France and India in their Illinois legal matters.

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Probate Law Landlord Tenant Law Corporate Law Real Property Law Estate Planning