IBA Compliance Connection

Your go to source for compliance!

The daughter of a deceased customer has presented a small estate affidavit and a will naming her as the executor. The deceased customer was receiving monthly checks as part of a personal injury claim settlement that are supposed to continue for the next twelve months. The daughter would like to withdraw the funds in the account but keep the account open so that it may continue to receive the monthly checks. Can we allow the daughter to make a partial withdrawal from the account while keeping the account open for these deposits?

—

by

admin

Provided the combined future monthly settlement payments together with all other estate assets do not exceed $100,000, we believe your bank may rely on the small estate affidavit and honor withdrawals made from the decedent’s account by the executor of the small estate (the affiant).

In our view, whether your bank should keep the decedent’s account open in order to accept future settlement payments — as opposed to requesting the executor to open a new account for the estate to receive these payments — is a business decision to be made by the bank. The estate is entitled to receive these payments irrespective of where the payments are deposited, and likewise, the executor is entitled to withdraw funds irrespective of the titling of the decedent’s account.

Having said that, we believe the best practice would be for the executor to open a new account on behalf of the estate, even though this would require the executor to arrange with the payor to make future payments to the new account (assuming these are ACH payments). While the Uniform Commercial Code (UCC) expressly authorizes a bank to accept checks made payable to a customer’s account “until the bank knows of the fact of death,” it is silent on transactions conducted on the account after the bank’s knowledge of the account holder’s death, and we are unaware of any case law that would extend the bank’s immunity under the UCC for accepting transactions on the account after knowledge of their death.

For resources related to our guidance, please see:

  • Probate Act of 1975, Article XXV, 755 ILCS 5/25-1(a)  (“When any person, corporation, or financial institution  . . .  holding personal estate of a decedent . . . is furnished with a small estate affidavit in substantially the form hereinafter set forth, that . . . financial institution shall pay the indebtedness, grant access to the safe deposit box, deliver the personal estate or transfer or issue the evidence of interest, indebtedness, property or right to persons and in the manner specified in the affidavit or to an agent appointed as hereinafter set forth.”)
  • Probate Act of 1975, Article XXV, 755 ILCS 5/25-1(b)(6) (“The gross value of the decedent’s entire personal estate, including the value of all property passing to any party either by intestacy or under a will, does not exceed $100,000. (Here, list each asset, e.g., cash, stock, and its fair market value.);”)
  • UCC, 810 ILCS 5/4-405(a) (“Neither death nor incompetence of a customer revokes the authority to accept, pay, collect, or account until the bank knows of the fact of death or of an adjudication of incompetence and has reasonable opportunity to act on it.”)