Decedent, minor and other fiduciary accounts, such as those subject to powers of attorney, are particularly susceptible to fraud. While some of these instances of fraud may result from an ignorance of the law on the part of the person with whom the credit union is dealing, many times they are purposeful evasions of the law and attempts to circumvent other beneficiaries. While I do not suggest that the credit union perform a full legal evaluation for every such account, it can put in place certain policies and procedures to minimize the risk associated with these accounts.
Here are a few scenarios to put the risks in context:
A woman comes into a branch with only a copy of the death certificate of the member and a will that states she is the executrix of the estate. She wants to withdraw all of the funds from the decedent memberâ€™s accounts. Can she? Probably not.
A co-agent appointed through a power of attorney comes into a branch without the other co-agent to withdraw the funds from the principalâ€™s account. Can he? Maybe.
The grandmother of a minor child comes into a branch with a letter from the mother of the minor child stating that she appoints the grandmother the guardian of the minor child. She would like to withdraw the funds from the minor childâ€™s account. Can she? Probably not.
The definitive answers to these questions and all questions involving decedents, estates, and fiduciaries are guided by state law, and therefore will vary. The law is voluminous and can be difficult to handle, but the following steps will help the credit union better manage these accounts.
First, the credit union should have detailed polices in place for use when dealing with these accounts. While it is impossible to write policies for every set of circumstances that may occur, the credit union can write policies to help guide its employees in the most common situations encountered in the branches. It may be helpful to work with local counsel when drafting these policies to be sure that they are in line with current state law, and they should be revised by counsel, as necessary, to reflect any changes in the law.
Second, the credit union should educate the individuals who are handling these accounts. These individuals should know the credit unionâ€™s policies with regards to these accounts and should also be apprised of the law in this area. For example, these individuals should know the rules and documents necessary to confirm the authority of an executor and an agent appointed through a power of attorney. A good resource for education are the classes offered to attorneys and paralegals. There are webinars and teleconferences which offer a high level overview of these areas of the law that can help educate the credit union employees. Most states do not require a financial institution to do independent investigation of the facts if the documents of authority appear genuine, but the credit union must be able to verify the documents.
Finally, no matter how thorough the policies or well educated the employees are, there will always be an unusual situation that comes into a branch, probably more often than anyone would like. If there is ever any doubt on how to handle the account of a decedent, minor or other fiduciary, always consult with the credit unionâ€™s attorney.
This body of law is vast and there are many nuances, but by implementing these steps, credit unions can offer the most protection possible to these most vulnerable members.
Amanda Smith is a partner with Messick & Lauer PC in Media, PA. She can be reached at 610-891-9000 or firstname.lastname@example.org