Q&A: Here’s a question that a Wisconsin credit union recently asked The League’s Legal Affairs team, along with our answer. Do you have a compliance question? Contact The League’s Compliance Hotline at (608) 640-4050 or email.
Q. Can the credit union cash or deposit a check payable to the estate of a deceased member if the person presenting the check gives us a signed & notarized Transfer by Affidavit form?
A. We don’t recommend this practice. To explain why, we need to explore what the Transfer by Affidavit form is and what the Wisconsin Statutes say about its use.
What is the affidavit & what’s it for?
We describe Wisconsin’s Transfer by Affidavit form in The League’s ii Release No. 0004. The form allows someone to claim a deceased person’s property (such as funds from a credit union account) without going through probate. The form can only be used if the person who died left a relatively small amount of property. (Technically, the affidavit can be used if the gross value of the decedent’s property that would be included in a probate estate, if one were started, is $50,000 or less.) Property that passes automatically upon death, such as a joint account or payable on death account, is not counted in the $50,000 calculation.
What are the options for checks payable to an estate?
The League tells credit unions that only a personal representative (or special administrator) who’s been appointed by a probate court can deposit a check that’s made payable to “the estate of” a deceased person. The check should be deposited, in full, into an account titled in the name of the estate (never into a personal account). The court-appointed personal rep or special administrator can then disburse funds from the account as needed.
If there is no probate estate, then the person with the check should be instructed to 1) go back to the party or business that issued it, 2) give them the completed affidavit, and 3) ask them to re-issue the check, making it payable to the individual who signed the affidavit. That individual then has legal obligations to disburse the funds to those who are entitled to them, as explained in the instructions for completing the affidavit form.
Why not just present the affidavit and check to the credit union? Because Wisconsin Statutes §867.03 says that the affidavit is to be given to “the person owing the money, having custody of the property, or acting as registrar or transfer agent of the evidences of interest, obligation to, or right.” Since the credit union is not the one “owing the money” or “having custody of” the funds that were owed to the deceased person, then the credit union should not allow someone to cash or deposit the check that’s payable to an estate, even with a completed and signed affidavit. Instead, the affidavit should be given to the party or business that issued the check in the first place (i.e., the “drawer” of the check); they’re the ones holding funds that should be paid to the deceased person’s heirs.
Sometimes, attorneys advising a deceased member’s family will insist that the credit union must cash checks payable to the deceased person’s estate if an affidavit is used. When that happens, it may help to point out the statute and explain that the credit union is not the party “having custody of” the funds that are owed to the deceased person.
If the party that issued the check refuses to re-issue it, even after getting a properly completed and signed Transfer by Affidavit form, then the person holding the check should consult an attorney. The solution may be to have a probate court appoint a personal representative or special administrator, just for the purpose of opening an account and depositing the check.
What could go wrong if the credit union accepts the check?
If a credit union relies on a Transfer by Affidavit form to let someone cash or deposit a check payable to “the estate of” a deceased person, the credit union could wind up liable for damages. For example, a bona fide personal representative may show up later and claim that the check was the property of the probate estate and that the credit union was negligent in letting someone else get the funds.
The Transfer by Affidavit law protects credit unions (and others) from liability if they transfer property to someone who presents a Transfer by Affidavit form. But we do not believe this protection applies if a credit union lets someone cash or deposit a check payable to an estate based simply on the affidavit – because the credit union is not the proper party to receive the affidavit, as explained above. As ii Release No. 0004 says: “The affidavit does not appear to protect the credit union if it allows an heir to cash a check that is payable to the decedent or to the estate.”
Could the credit union make an exception?
Some credit unions choose to accept the risks and allow heirs or others with signed Transfer by Affidavit forms to cash/deposit checks that are payable to the estate of a deceased member, especially if the checks are for small amounts. That’s not a practice we would advise, but credit union management might decide it is worth the risk to avoid inconveniencing grieving loved ones.
If your credit union wants to take that route, just keep in mind that it could face liability and lose statutory protections. Former Director of Legal Affairs, John Engel, once responded to a similar credit union question and remarked, “I’m not saying the sky is falling in regard to those credit unions that accept the Transfer by Affidavit to accept a check payable to the decedent or estate. Many have done it for years. But if a dispute emerges, and the credit union tries to rely on the statute for protection, it may find itself unprotected.”
