By Tim Barkley. October 2014.
“Dad’s will leaves everything to me, but when I showed it to the bank they said I needed letters of something. Why can’t they just give me the money?”
“Can’t I just go to the broker and cash in Mom’s account? I’m the Executor under the will! I even showed them my driver’s license and the will, and they said I need to talk to a lawyer.”
“I need to pay my brother’s bills, and the will says I can, but the bank won’t give me the money!”
The will, by itself, doesn’t give the person named as executor authority to handle the deceased person’s assets, nor does it pass title to the beneficiaries. What if the will were invalid or procured by fraud or undue influence? What if the person named as Executor isn’t competent, or is a thief?
What if there are bills to be paid – the creditor might sue the bank or broker for releasing the funds. How can the bank or broker be sure that the creditors are paid before the named beneficiary spends the money? How can they be sure that the person receiving the funds doesn’t spend it all without distributing to the other beneficiaries?
The bank and broker don’t want to try to figure that all out, and be liable if they make a mistake. They require that the Court declare who is legally authorized to transfer and receive the assets. They require that the person receiving the assets be supervised in the use of those assets so that the bank or broker is not liable.
What provides that authorization is the Court’s order agreeing that the will is valid (called “probating” the will) and appointing a Personal Representative (PR) of the estate. What provides that supervision is the process of estate administration overseen by the Register of Wills.
If there’s no estate, there’s no PR, and thus no one with authority to transfer stock or access bank accounts. So the will must be probated, a PR appointed and the estate administered according to its terms. If there’s no will, the Court will appoint a PR based on the legal “priorities” for control of the estate of the deceased, and then the Register will supervise the administration of the estate.
Once a PR is appointed, the bank or broker can be sure that they are protected in releasing funds to the PR. That’s important if you want your bank or broker to stay in business, and not be bankrupted by lawsuits.
Stocks, bonds and mutual funds are “securities.” Before the securities of the deceased can be sold and the proceeds distributed, generally the securities have to be transferred to the estate of the deceased. Security transfer forms have to be signed by a person with authority, and his or her signature usually must be guaranteed by a bank. The signature guarantee is a guarantee by the bank that the person signing actually has authority to transfer the stock, and if the person doesn’t have authority, the bank is agreeing to pay damages up to $1M.
Bank accounts and CDs usually don’t require signature guarantees, but the bank still wants to know who has authority to receive the funds. Generally, the funds will only be paid by check made payable to the estate of the decedent.
All of this can be planned around, but as described in the prior article by this author, might best be left in place. Consult your estate planning professional to determine what is best for you. If you find yourself in the position described in this article, consult a probate lawyer or other professional to start the process of estate administration.
Attorney Tim Barkley
The Tim Barkley Law Offices
One Park Avenue
P.O. Box 1136
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