IBA Compliance Connection

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We have a customer who owns a certificate of deposit (CD) jointly with her spouse. If she presents a final divorce judgment with an order awarding her the CD, can we rely on that to remove her spouse’s name from the CD? Or would it be better to have the spouse who was awarded the CD close the account and then open a new one?

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We believe you may rely on a final, non-appealable court order that awards the CD to one of the ex-spouses for either removing the other ex-spouse from the existing CD or closing the CD and opening a new one for the ex-spouse who was awarded the CD.

In either case, your bank should retain a copy of the court order as part of the CD file. Also, we recommend waiving any early withdrawal penalties for this purpose.

For resources related to our guidance, please see:

  • Regulation D, 12 CFR 204.2(c) (“Time deposit means: (i) A deposit that the depositor does not have a right and is not permitted to make withdrawals from within six days after the date of deposit unless the deposit is subject to an early withdrawal penalty of at least seven days’ simple interest on amounts withdrawn within the first six days after deposit. . . .”)