Assuming that your bank has the proper authorization to remove a joint account holder from an account, we recommend asking the remaining account holder to execute a new signature card, rather than crossing out the former account holder’s name. While we are not aware of any authority that forbids the practice of crossing out a name, requiring a new signature card for any changes provides a clear record of an amendment to the account titling. For purposes of calculating FDIC insurance coverage, it is important to maintain updated records that reflect when an account ceases to be a qualifying joint account.

We are aware of at least one Illinois case that reveals the perils of failing to maintain a consistent policy with respect to altering account information. An Illinois appellate court ruled in favor of a beneficiary and against a bank where the bank had failed to make changes in its account records consistently, in some cases requiring new signature cards when account information was changed, and in other cases allowing original signature cards to be altered on their face. The lack of a consistent procedure contributed to the bank improperly paying the proceeds of two payable on death accounts, resulting in a lawsuit and liability to the wronged party.

Also, as a reminder, your bank will want to ensure that the updated information on the signature cards reflects the account information maintained by your bank’s core processor.

For resources related to our guidance, please see:

• Joint ownership accounts, 12 CFR 330.09(a) (“Qualifying joint accounts, whether owned as joint tenants with the right of survivorship, as tenants in common or as tenants by the entirety, shall be insured separately from any individually owned (single ownership) deposit accounts maintained by the co-owners. (Example: If A has a single ownership account and also is a joint owner of a qualifying joint account, A's interest in the joint account would be insured separately from his or her interest in the individual account.) Qualifying joint accounts in the names of both husband and wife which are comprised of community property funds shall be added together and insured up to twice the SMDIA, separately from any funds deposited into accounts bearing their individual names.”)

• Joint ownership accounts, 12 CFR 330.09(c)(1) (“Qualifying joint accounts. (1) A joint deposit account shall be deemed to be a qualifying joint account, for purposes of this section, only if: (i) All co-owners of the funds in the account are “natural persons” (as defined in § 330.1(l)); and (ii) Each co-owner has personally signed a deposit account signature card