IBA Compliance Connection

Your go to source for compliance!

The executor for an estate has presented us with a check payable to “Jane Doe, as Executor of the Estate of Julie Doe, deceased, acting with full authority under the Independent Administration of Estates Act, Superior Court of California.” She wishes to deposit the check into her personal account under her name, not an estate account. The check represents funds from the sale of the decedent’s house, and the executor tells us that the estate already has closed. Can we allow her to deposit the check into a personal account?

—

by

admin

No, we do not recommend permitting the customer to deposit a check made payable to her as the executor of an estate into her personal account. This transaction could result in a breach of the Uniform Commercial Code (UCC) warranties.

When delivering the check to the payor bank for payment, the UCC would require your bank to warrant that the check was paid to the payee or to the payee’s account. Your bank could be viewed as breaching that warranty by depositing the check into an account that does not belong to the payee, which is Jane Doe in her capacity as executor — not as a private individual. This concern is particularly pronounced in the context of a probate estate, where there could be some question as to whether the executor was properly handling the sale proceeds for the decedent’s property (which generally must be accounted for to the probate court).

Additionally — at least in Illinois — an executor’s authority is terminated as of the date of the estate closing. We cannot opine as to California law, which likely would apply to this point, but at least with respect to Illinois law, your customer no longer would have the authority to act as executor of this estate, since it already has been closed.

We realize that following this guidance may inconvenience the customer, who apparently already has closed whatever accounts she may have maintained for the estate. You may wish to ask her to present current letters of office to verify that her authority as an executor remains valid, after which she could open a separate account for the estate at your bank with this check as its initial (and perhaps only) deposit.

For resources related to our guidance, please see:

  • UCC, 810 ILCS 5/4-205(2) (“If a customer delivers an item to a depositary bank for collection: . . . (2) the depositary bank warrants to collecting banks, the payor bank or other payor, and the drawer that the amount of the item was paid to the customer or deposited to the customer’s account.”)
  • Illinois Probate Act, Independent Administration, 755 ILCS 5/28-11 (“Closing the estate. . . . (b) An independent representative seeking discharge shall mail or deliver to all interested persons an accounting and shall file in the court a verified report stating substantially as follows: . . . .”)