The Texas Independent Banker - May/June 2017 - 8

G E N E R A L C O U N S E L' S C O R N E R

Death of a Customer
KAREN M. NEELEY
IBAT GENERAL COUNSEL

Texas law permits
individuals to
use a variety of
account types to
avoid probate.
These include
the revocable
trust account
(also known as
a Totten trust), a
POD account and
a joint account
with rights of
survivorship.

IN THE OLDEN days, bankers either watched the
obits page of the local newspaper or subscribed
to a service that advised it of local deaths. This
was very useful in both customer relations and
limiting liability for transactions after the customer
was no longer able to make them. Now, the bank
operations area is more likely to learn of the death
of a depositor when an alleged heir or successor
comes in to claim the account.
The following discussion is not intended to turn
the banker into a probate expert but rather to focus
on the documentation and procedures that should
be used by the Texas bank.

Deposit Accounts
Types and Documentation
Texas law permits individuals to use a variety
of account types to avoid probate. These include
the revocable trust account (also known as a Totten
trust), a POD account and a joint account with rights
of survivorship. In all these account types, the customers must clearly select that account type, and all
owners must sign the account agreement. POD and
trust beneficiaries do not need to sign, and sometimes
they are not even aware of the account. Typically, the
account agreement is the signature "card" with terms
and conditions attached to it. Convenience signers
do not have any ownership rights in the account for
which they are authorized to sign.
Some customers may have formal trusts-either
irrevocable or revocable. The latter is commonly
referred to as a "living trust" since the makers of
the trust are often the initial trustees and initial
beneficiaries. The bank should have a certificate
of trust on file to document these. That will clearly
identify the successor trustee and the beneficiaries
for the trust.
Documentation of Death
The bank must receive a death certificate to
establish that the customer is in fact deceased.
A copy of the will is totally useless. I have a will,
but thankfully it is not in effect yet! When the
death certificate is received, the bank should
freeze the account (if it is an individual one) or
close the multiple party account and remit the
balance to the survivor or POD beneficiary. Look

8

The Texas IndependenT Banker

May/June 2017

for automatic payments of retirement or social
security. Depending on the timing, the last payment
may need to be returned.
Estate Documentation
If there is no POD beneficiary or survivor to a
joint account, then the bank will need documentation
as to who should be able to take the account. If there
was a formal trust, the trustee or successor trustee
will continue to manage the account. The death of
the customer will not terminate a formal trust.
If the customer had a will, the executor should
file it for probate. Often, they will simply bring the
will to the bank and expect you to turn over the
account. Do not do this! A will has no effect until it
is probated. And do not accept an order probating
and appointing the executor. That has no effect
until the executor takes the oath and files a bond
(if required and not waived). In short, you need
Letters Testamentary issued by the County Clerk.
If there is a dependent administration (i.e., there
is no will appointing an executor), then you should
receive Letters of Administration.
If there is a will but no need for administration
(i.e., no debts to manage), then the will could be
probated as a Muniment of Title. You should receive
a certified copy of the order approving it as such.
If there is no will and the estate is small, then
there are alternative procedures that are available. These include a Small Estate Affidavit (if the
estate is $50,000 and below). This is approved and
signed by a probate judge. You should receive a
certified copy.
If the estate is larger than that, then the heirs
could obtain an order from the probate court determining heirship. That would clearly identify who
was entitled to the assets.
If the estate is truly small, the heirs may want
to use a less expensive alternative. They may offer
an Affidavit of Heirship. There is a statutory form
in the Estates Code. It should be signed by two
disinterested persons who were familiar with the
deceased, and their signatures should be notarized.
Remember that a power of attorney-even a
durable one-expires on the death of the principal.
Therefore, an attorney in fact's authority expires
on the death of the principal.



Table of Contents for the Digital Edition of The Texas Independent Banker - May/June 2017

Up Front CHRISTOPHER L. WILLISTON, CAE
General Counsel’s Corner KAREN M. NEELEY
Services Spotlight JOE KIM KING
The Compliance Guy KELLY GOULART, CRCM CAMS CIA
News
Leadership Conference Preview
Gap Management: An Idea Whose Time Has Gone LESTER MURRAY
IBAT 2017 Regional Meeting Tour CHRISTOPHER L. WILLISTON VI, CAE
In an Uncertain World, Look for the Silver Lining MARK ROE
Farewell from Mae Beth
People
Calendars
New Members
Index of Advertisers
Communities
The Texas Independent Banker - May/June 2017 - cover1
The Texas Independent Banker - May/June 2017 - cover2
The Texas Independent Banker - May/June 2017 - 3
The Texas Independent Banker - May/June 2017 - 4
The Texas Independent Banker - May/June 2017 - 5
The Texas Independent Banker - May/June 2017 - Up Front CHRISTOPHER L. WILLISTON, CAE
The Texas Independent Banker - May/June 2017 - 7
The Texas Independent Banker - May/June 2017 - General Counsel’s Corner KAREN M. NEELEY
The Texas Independent Banker - May/June 2017 - 9
The Texas Independent Banker - May/June 2017 - Services Spotlight JOE KIM KING
The Texas Independent Banker - May/June 2017 - 11
The Texas Independent Banker - May/June 2017 - 12
The Texas Independent Banker - May/June 2017 - The Compliance Guy KELLY GOULART, CRCM CAMS CIA
The Texas Independent Banker - May/June 2017 - 14
The Texas Independent Banker - May/June 2017 - News
The Texas Independent Banker - May/June 2017 - Leadership Conference Preview
The Texas Independent Banker - May/June 2017 - 17
The Texas Independent Banker - May/June 2017 - 18
The Texas Independent Banker - May/June 2017 - Gap Management: An Idea Whose Time Has Gone LESTER MURRAY
The Texas Independent Banker - May/June 2017 - 20
The Texas Independent Banker - May/June 2017 - 21
The Texas Independent Banker - May/June 2017 - IBAT 2017 Regional Meeting Tour CHRISTOPHER L. WILLISTON VI, CAE
The Texas Independent Banker - May/June 2017 - 23
The Texas Independent Banker - May/June 2017 - 24
The Texas Independent Banker - May/June 2017 - 25
The Texas Independent Banker - May/June 2017 - In an Uncertain World, Look for the Silver Lining MARK ROE
The Texas Independent Banker - May/June 2017 - 27
The Texas Independent Banker - May/June 2017 - 28
The Texas Independent Banker - May/June 2017 - Farewell from Mae Beth
The Texas Independent Banker - May/June 2017 - People
The Texas Independent Banker - May/June 2017 - 31
The Texas Independent Banker - May/June 2017 - Calendars
The Texas Independent Banker - May/June 2017 - Index of Advertisers
The Texas Independent Banker - May/June 2017 - Communities
The Texas Independent Banker - May/June 2017 - cover3
The Texas Independent Banker - May/June 2017 - cover4
The Texas Independent Banker - May/June 2017 - 37
The Texas Independent Banker - May/June 2017 - 38
The Texas Independent Banker - May/June 2017 - 39
The Texas Independent Banker - May/June 2017 - 40
The Texas Independent Banker - May/June 2017 - 41
The Texas Independent Banker - May/June 2017 - 42
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