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Fairfield National Bank v. Abigail Chansler and Cordelia Chansler

January 22, 2013


Appeal from the Circuit Court of Hamilton County. No. 11-MR-02 Honorable Barry L. Vaughan, Judge, presiding.

The opinion of the court was delivered by: Justice Goldenhersh


The text of this decision may be changed or corrected prior to the filing of a Petition for Rehearing or the disposition of the same.

JUSTICE GOLDENHERSH delivered the judgment of the court, with opinion. Justices Chapman and Stewart concurred in the judgment and opinion.


¶ 1 Plaintiff, Fairfield National Bank, filed an action in interpleader in the miscellaneous remedies division of the circuit court of Hamilton County requesting an order determining the rights of respective defendants for two certificates of deposit. The circuit court entered summary judgment in favor of defendants Abigail and Cordelia Chansler, finding that the designated beneficiaries on the certificates of deposit had not been changed in the timely manner required by the Illinois Trust and Payable on Death Accounts Act (Act) (205 ILCS 625/1 to 15 (West 2010)). Defendant Belinda Munsell, individually and as independent executor of the estate of Malinda G. Munsell, deceased, appealed. On appeal, the issue is whether Fairfield National Bank had authority to change the beneficiaries on the certificates of deposit.

¶ 2 We reverse and remand.


¶ 4 On October 12, 2010, Malinda opened two certificates of deposit with payable-on-death (POD) provisions at Fairfield National Bank. As payable-on-death accounts, Malinda remained the holder of the accounts, but for each of the certificates she named a designated beneficiary upon her death. For one certificate, her granddaughter, Abigail Chansler, was designated a beneficiary, and on the other certificate another granddaughter, Cordelia Chansler, was named beneficiary.

¶ 5 Sometime in early March 2011, Malinda telephoned Fairfield National Bank and requested forms for changing the beneficiaries on the certificates of deposit. On March 4, 2011, Fairfield National Bank prepared and mailed to Malinda withdrawal forms, signature cards, and confirmations of time deposit. Malinda filled in the paperwork to indicate a change of the designated beneficiary for both certificates of deposit to Belinda Munsell, Malinda's daughter and the mother of both Abigail and Cordelia. On March 12, 2011, the filled-in forms and a $10 check for a processing fee were placed in the mail. Malinda died on March 14, 2011.

¶ 6 On March 15, 2011, Fairfield National Bank received the forms, processed the paperwork, accepted the $10 check, and changed the designated beneficiary on both of the certificates of deposit, assigning new numbers to the accounts.

¶ 7 On March 22, 2011, Jeff Chansler, ex-husband of Belinda and father of Abigail and Cordelia, contacted Fairfield National Bank and informed them that Malinda had died before the date the paperwork had been processed. Jeff Chansler asserted that Abigail and Cordelia were the rightful beneficiaries of the accounts.

¶ 8 Fairfield National Bank filed this complaint in interpleader. The Chanslers filed a motion for summary judgment asserting that the certificates should have remained in the original form with each of them as designated beneficiaries on the date of Malinda's death. Belinda, individually and as the executor of the estate of Malinda, filed a motion for summary judgment asserting that Malinda had effectively changed the beneficiaries for the certificates of deposit or, alternatively, revoked the designations of the Chanslers as beneficiaries in such a manner that the assets of the account became part of Malinda's estate. The trial court entered summary judgment in favor of the Chanslers finding that the designated beneficiaries had not been changed according to the terms of the Act.

¶ 9 Belinda appeals.


¶ 11 The underlying action is one in interpleader. The interpleading party, a bank, seeks a determination of whether it had authority to accept Malinda's request for a change of beneficiaries on two certificates of deposit. The certificates of deposit were arranged as payable on death of Malinda. Payable-on-death accounts are authorized by the Act. 205 ILCS 625/1 to 15 (West 2010). The Act, however, is ambiguous. The answer rests in the ordinary care of financial institutions.

¶ 12 Payable-on-death accounts are recognized as a useful tool for estate planning. See Helen W. Gunnarsson, POD and TOD Accounts and Your Estate-Planning Arsenal, 95 Ill. B.J. 510 (2007). This was not always so. Such accounts are often referred to as Totten trusts--after precedent establishing their validity. In re Totten, 71 N.E. 748, 750 (N.Y. 1904). The propriety of Totten trusts was challenged in several jurisdictions because the requirements for creating such an account are not as stringent as the witnessing requirements for a will. 17 Robert S. Hunter, Illinois Practice § 38:1 (4th ed. 2007) ("The nature of the payable on death account").

¶ 13 In 1965, the Illinois Supreme Court recognized the validity of Totten trusts. In re Estate of Petralia, 32 Ill. 2d 134, 135, 204 N.E.2d 1, 2 (1965). Petralia held that the signature card for a savings account designating the holder's daughter as a beneficiary on his death was sufficient to create a valid trust despite not being witnessed as a will. Petralia recognized the definition of Totten trusts provided in the Restatement (Second) of Trusts as the law of Illinois. Petralia, 32 Ill. 2d at 138, 204 N.E.2d at 3; Restatement (Second) of Trusts § 58 (1959).

¶ 14 Prior to the Act, the legislature authorized payable-on-death accounts in certain financial institutions through the Illinois Savings and Loan Act. Ill. Rev. Stat. 1955, ch. 32,

¶ 770. These accounts were seen as clearly testamentary. In re Estate of Gubala, 81 Ill. App. 2d 378, 382, 225 N.E.2d 646, 649 (1967); Johnson v. Garellick, 118 Ill. App. 2d 80, 83, 254 N.E.2d 597, 599 (1969). Nonetheless, the legislature exempted such payable-on-death accounts from the requirements of the statute of wills. Johnson,118 Ill. App. 2d at 83, 254 N.E.2d at 599; see In re Estate of Wright, 17 Ill. App. 3d 894, 896-97, 308 N.E.2d 319, 321 (1974) (absence of similar provision in the Illinois Banking Act did not indicate that legislature intended to proscribe holders from creating Totten trusts at banks and other financial institutions).

¶ 15 In 1985, the General Assembly established the Act. 205 ILCS 625/1 to 15 (West 2010); Pub. Act 84-461, §§ 1--5 (eff. Jan. 1, 1986). The Act covers a broad array of financial institutions, including those under the Illinois Savings and Loan Act and the Illinois Banking Act. 205 ILCS 625/2(a) (West 2010). Certificates of deposit are specifically listed as a type of account covered by the Act. 205 ILCS 625/2(b) (West 2010).

ΒΆ 16 Section 4 of the Act now embodies the law for "Payable on Death Account Incidents." 205 ILCS 625/4 (West 2010). The introductory paragraph authorizes a holder, or holders, of an account to enter into an agreement with a financial institution that provides for payment of the account to designated beneficiaries on the death of the last surviving holder. Sequential subparagraphs provide terms for change of the designated ...

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