Dealing with Appropriate Parties to Avoid Liability Following the Death of a Bank Account Holder

Following the death of a bank account holder, family members often step forward to claim the assets in the decedent's account. Excluding certain joint account holders and pay on death designees, with whom should the bank do business? This article will address the qualification of personal representatives, as well as the limited circumstances under which a bank may pay out and close a decedent's account to a person who is not a qualified personal representative using a small estate affidavit.

The Personal Representative

Banks should only deal with a duly qualified personal representative of a decedent account holder's estate, unless a proper small estate affidavit (as discussed below) is presented. A duly qualified personal representative in Virginia will have in hand a certificate of qualification from a circuit court clerk. Qualification is a procedure by which the personal representative appears before the clerk of the circuit court, makes an oath to properly administer the estate, and is bonded with a surety unless a surety bond is waived by the decedent's will.

Family members may have engaged in litigation to determine who will be appointed as the personal representative of the decedent's estate, particularly when there is no will. This will result in a judge's order appointing a personal representative. Such an order does not vitiate the requirement of qualification. The person (or institution) appointed by the judge still must take the additional step of qualification before the clerk of the court to obtain a certificate of qualification. Without the certificate, the personal representative essentially has no legal powers to handle assets of the estate.

A personal representative will generally have one of three titles: executor, administrator, or administrator c.t.a (cum testamento annexo). An executor is a personal representative nominated by the decedent in his or her will. When a decedent leaves no valid will, the personal representative is called an administrator. An administrator c.t.a. is appointed in the instance where a will is probated, but the named executor is unable or unwilling to qualify. Translated from Latin, administrator cum testamento annexo means administrator "with the will attached." There can be differences in the scope of the powers commensurate with each title, particularly with respect to handling the decedent's real estate.

The Small Estate Affidavit

In the absence of a qualified personal representative, a bank may pay to a decedent account holder's designated successor any amount up to $50,000 when a proper small estate affidavit is presented. Under the small estate affidavit statute, a successor is defined as any person, other than a creditor, who is entitled under the decedent's will or the laws of intestacy to all or part of a small asset.

A small estate affidavit is sworn under oath by the successor before a notary or court clerk. Among other statutory requirements, the successor must attest to the fact that the entire value of the decedent's personal probate estate does not exceed $50,000, that at least 60 days have elapsed since the decedent's death, that the will (if any) has been probated, and that there is no application pending for the appointment of a personal representative.

Absent a small estate affidavit, a bank may, but is not required to, pay a successor any amount of $25,000 or less owing to the decedent if 60 days have elapsed and there is no application for pending for the appointment of a personal representative. However, obtaining a small estate affidavit from the successor claiming the money is the more prudent approach.

Conclusion

Generally, only a duly qualified personal representative should claim funds owing to the decedent account holder. Under certain circumstances, paying over account funds to a decedent's successor under the protection of a small estate affidavit is appropriate. There may, however, be suspicious circumstances or suspected fraud by a person presenting the affidavit. Legal counsel should be consulted should any question arise as to the validity of the affidavit. The small estate affidavit must strictly comply with the requirements of the statute to be effective. Payment to a party other than the qualified personal representative or successor under affidavit, or payment pursuant to a defective affidavit, could lead to liability for breach of contract and may also be in violation of state and federal banking regulations.