When the letters FBO are written on a check, that means that a third party is involved, such as a brokerage or trustee. FBO means "for the benefit of" another person. You may or may not have dealt with these kinds of checks, but they are handled differently from those that are made out to you directly and that can be cashed right away.
FBO Meaning on Checks
FBO checks are made to be payable from one party for another person's benefit through a custodian or an institution. One example would be if a trustee wrote out a check to an assisted living facility to cover the monthly fees for a trustee beneficiary. You might see "Pay to the Order of ABC Assisted Living Facility FBO Susan Smith." Those monies could be then deposited into Susan Smith's account at the facility.
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This protects the beneficiary from having the funds used for something else. There are banks that require both parties to endorse their checks, so this can be a problem if the beneficiary is unable to endorse the check for medical reasons. It is always best to check with the bank before writing FBO checks.
FBO checks cannot be cashed. Instead, they can be used for different financial transactions when money needs to be moved between investments and accounts. FBO checks are made payable to third-party businesses, but these businesses can only use the funds in ways that benefit FBO recipients; depositing the funds into a beneficiary-owned account is the way it usually works.
Basics of Check Writing
The basic parts of a check include the date in the upper-right corner and the "Pay to the Order of" line toward the top. Be sure to spell the person's name out correctly to be safe. The numerical amount of the check goes in the box on the right. Write this close to the left border to prevent someone from adding in numbers to commit fraud. You can then write out the check amount in words under the "Pay to the Order of" line. Note that this must match up exactly with the numerals in the box.
And of course, checks need to be signed; after you write them, be sure to record them in a checkbook. The numbers on the bottom of the check also contain important information. The first one on the left is the routing number. This nine-digit code indicates which bank branch location the account was opened at. Employers and other parties use routing numbers to deposit funds into bank accounts. To the right of that is the specific account number for the personal account.
Preventing Check Fraud
To prevent check fraud, write "for deposit only" on the back of the check. You can take it a step further and write something like "for deposit only – in account #1234567." This can be done if the check is an FBO check as well.
If the check is an FBO check made out to a business entity, an authorized person must endorse the check on behalf of their business. This requires signing the name of the business as shown on the check and a signature from the authorized person, followed by their title.
Consider also: How to Write a Check for a Beneficiary