Convenience Accounts: A New Alternative To Joint Tenancy Accounts

A new law in Illinois allows a financial institution to offer a new "convenience

account" which would be opened in the name of a depositor and a "convenience depositor." A convenience account is intended for use with certain types of banking needs. For example, a parent needing assistance with banking could add a child to the account as a "convenience depositor." The child would have the ability to also make withdrawals or deposits to the account for the convenience of the parent. The ownership of the deposits would be in the name of the parent, and the parent"s social security number would be used. The funds would not be considered as given one-half to the child, and the child would not receive the account as a survivor upon the parent"s death.

Creation of a new convenience account is a cogent option to a joint tenancy account between parent and child. There are some problems with the common use of a joint tenancy account in this type of situation. Under some circumstances, the child can be considered to have received a gift of one-half of the joint tenancy account. This scenario carries the risk of a potential creditor of a child accessing the account through legal process to recover for the child's debt. Such a gift, if over $13,000.00 per person in a single year (reflecting the 2011 limit) would require the filing of a gift tax return. Also, the child could be considered as owning the entire joint tenancy account upon the death of the parent, to the exclusion of other children or natural heirs of the parent. These unintended results could apply unless it could be proven in court that the joint tenancy account was intended to be used only for the convenience of the parent. This type of account was created to give alternatives which do not bear some of the issues involved with an account held in joint tenancy.

You should consult your attorney to review and coordinate your estate plan. A properly drafted Will or Living Trust, as part of your entire estate plan, should be used together with any convenience accounts to make sure that the account (and the rest of your property) goes to the persons you desire upon your death.

This article is intended to present general information for educational purposes, is not legal advice and should not be relied upon in connection with any particular matter. The reader is advised to immediately retain their own separate legal counsel with respect to any specific legal issue. Rights to bring a claim will expire through the passage of time by the applicable statute of limitations.

by: Ralph E. Elliott

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