IBA Compliance Connection

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A customer with a Treasury check made out to her as the administrator for her deceased son would like to deposit the check into her personal account. The check appears to be for the son’s tax refund, and the customer has presented us with a copy of a certificate of voluntary administration issued by a New York county court. The certificate indicates that it is not valid without the court’s raised seal, and the copy does not have a raised seal. The customer also presented us with an IRS Form 56 (Notice Concerning Fiduciary Relationship), but we have not received a death certificate. Can we deposit the check into the customer’s account based on this documentation?

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No, we would not recommend permitting the customer to deposit a check made payable to her as the administrator for her deceased son into her personal account. We believe that New York law would prohibit such a transaction, and the transaction could potentially result in a breach of the Uniform Commercial Code (UCC) warranties.

While we are not experts in New York law, it appears that your customer likely would need to open an estate account in a financial institution located in New York to deposit the Treasury check. Article 13 of the New York Surrogates Court Procedure Act provides for the appointment of “voluntary administrators” and requires that they deposit all money they receive into an estate bank account, which must be opened in a bank, trust company, savings and loan association, or credit union “in this state” — meaning, in New York.

Additionally, we note that the UCC requires your bank to warrant that a check does not have any missing or unauthorized endorsements. Notwithstanding New York law, if you allowed this customer to deposit the Treasury check into her personal account, you would need to ensure that she has the authority to endorse the check in her capacity as administrator for her deceased son over to herself, individually. Otherwise, the check would not be properly payable under the UCC, and you could be liable to the paying bank if the U.S. Treasury objects to the payment of the check with a missing or unauthorized endorsement.

For resources related to our guidance, please see:

  • New York Surrogates Court Procedure Act, § 1301 (“In this article:

1. A small estate is the estate of a domiciliary or a non-domiciliary who dies leaving personal property having a gross value of $50,000 or less exclusive of property required to be set off under EPTL 5-3.1 (a).

2. A voluntary administrator is a person who qualifies and undertakes to settle the estate of the decedent without the formality of court administration as hereinafter provided.”)

  • New York Surrogates Court Procedure Act, § 1304(5) (“A short certificate of the court showing the filing by the voluntary administrator of the required affidavit, shall evidence his, her or its qualification and authority to act. The clerk may indicate on the certificate that it is valid only for a transfer or transaction as specified thereon. The voluntary administrator shall deliver a certificate to each debtor, transfer agent, safe deposit company, bank, trust company or other person holding or having custody, possession or control of any personal property of the decedent which the voluntary administrator seeks to reduce to possession or otherwise affect the title thereof.”)
  • New York Surrogates Court Procedure Act, § 1306(3) (“For the purpose of this article, a voluntary administrator shall be deemed to be the fiduciary of the estate until another fiduciary is appointed, and except as hereinafter provided, the voluntary administrator shall have the rights, powers and duties with respect to personal property of an administrator duly appointed for the estate. The voluntary administrator shall have no power to enforce a claim for the wrongful death of or a claim for personal injuries to the decedent.”)
  • New York Surrogates Court Procedure Act, § 1307 (“A voluntary administrator shall

1. Deposit in an estate bank account to be opened by him in a bank, trust company, savings bank, savings and loan association or federal savings and loan association in this state, credit union or federal credit union in this state all money received. He shall sign all checks drawn on or withdrawals from the account in the name of the estate by himself as voluntary administrator. Without compensation for his services, he shall pay so far as possible out of the decedent’s assets coming into his possession, the necessary expenses of administration, the reasonable funeral expenses of the decedent and the decedent’s debts in the order provided by law. He shall then distribute the balance to the person or persons entitled and in the amount or amounts provided by EPTL 4-1.1 if decedent died intestate or if a will is filed which is valid on its face, he shall distribute to the persons named in such will, subject to the right of any person affected to contest such will at any time.

2. Account for all personal property of the decedent received and disbursed by him by filing with the clerk of the court a statement of all assets collected and of all payments and distributions made by him and receipts for or cancelled checks evidencing such payments and distributions. No fee shall be charged for the filing of such account.”)

  • Illinois UCC, 810 ILCS 5/3-417(a) and 810 ILCS 5/4-208(a) (“Presentment warranties. (a) If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, (i) the person obtaining payment or acceptance, at the time of presentment, and (ii) a previous transferor of the draft, at the time of transfer, warrant to the drawee making payment or accepting the draft in good faith that: (1) the warrantor is or was, at the time the warrantor transferred the draft, a person entitled to enforce the draft or authorized to obtain payment or acceptance of the draft on behalf of a person entitled to enforce the draft
  • UCC § 3-417 cmt. 2 (“Subsection (a)(1) in effect is a warranty that there are no unauthorized or missing indorsements.”)
  • Illinois UCC, 810 ILCS 5/3-403(a) (“Unless otherwise provided in this Article or Article 4, an unauthorized signature is ineffective except as the signature of the unauthorized signer in favor of a person who in good faith pays the instrument or takes it for value.”)
  • Illinois UCC, § 3-403, cmt. 1 (“‘Unauthorized’ signature is defined in Section 1-201(43) as one that includes a forgery as well as a signature made by one exceeding actual or apparent authority.”)
  • Illinois UCC, 810 ILCS 5/4-401(a) (“A bank may charge against the account of a customer an item that is properly payable from that account even though the charge creates an overdraft. An item is properly payable if it is authorized by the customer and is in accordance with any agreement between the customer and bank.”)
  • Illinois UCC, 810 ILCS 5/4-208(b) (“A drawee making payment may recover from any warrantor damages for breach of warranty equal to the amount paid by the drawee less the amount the drawee received or is entitled to receive from the drawer because of the payment. In addition, the drawee is entitled to compensation for expenses and loss of interest resulting from the breach. The right of the drawee to recover damages under this subsection is not affected by any failure of the drawee to exercise ordinary care in making payment. If the drawee accepts the draft (i) breach of warranty is a defense to the obligation of the acceptor, and (ii) if the acceptor makes payment with respect to the draft, the acceptor is entitled to recover from any warrantor for breach of warranty the amounts stated in this subsection.”)