Serving the Dearly Departed: Accounts of Deceased Members

By Keith Schostag, NAFCU Senior Regulatory Compliance Counsel

Keith Schostag

If a member died today, would your staff know what to do? Unfortunately, the law governing death and the treatment of a deceased person’s property is mostly a mish-mash of state law. However, here are some common issues credit unions face when dealing with a deceased member and their accounts.

Share Accounts

Generally, NCUA is silent on issues regarding share accounts and deceased members. However, Article III, Section 5 of the current model bylaws are clear that a share account of a deceased member (with no joint owner) may be continued until “the close of the dividend period in which the administration of the deceased’s estate is completed.”

But there are many more issues than how long to keep a deceased’s account open. Probate, trust and estate, rights of survivorship and agency issues are generally governed under state law and credit unions may need to rely on local counsel as issues arise with a deceased member’s accounts. Here are some questions that NAFCU members have asked on this topic that may be helpful when discussing this with legal counsel:

  • Does a member’s agent have authority to make transactions or withdrawals after the member has died;
  • Does a joint owner have ownership over remaining funds in an account after a joint owner dies (in some states, joint owners do not have an automatic right to all remaining funds in an account);
  • Who has authority to obtain information on and/or access to a deceased member’s accounts;
  • What documents, under state law, prove a person has authority to access a deceased member’s accounts; and
  • What is a credit union’s potential liability for mishandling a deceased member’s accounts?

These are just some of the issues that may come up when a member dies. Credit unions may consider performing a comprehensive review of their policies, procedures and account agreements followed by a review by their local counsel to ensure compliance with applicable state law. This would allow credit union staff to more easily deal with issues as they arise rather than the credit union dealing with angry relatives and no answers.

Estate Accounts

Sometimes, federal credit unions (FCUs) are approached to open a new account for the administration of an estate. When this happens, FCUs should look to the membership status of the individuals involved with the estate—such as the administrator, decedent and beneficiaries—to see if the FCU may open an account. An NCUA legal opinion letter provides potential scenarios and discusses whether a FCU may open an account:

Decedent was a member.

Account may be opened.

Administrator is a member, but decedent and beneficiaries are not members.

Account may not be maintained.

Neither the decedent nor administrator are members, but beneficiaries are members.

Account may be opened and maintained if all beneficiaries of an estate are members of the FCU, even if the decedent was not a member. If only some of the beneficiaries are members and the decedent was not a member, then an account cannot be opened.

FCUs that are state-chartered should look to their applicable state law to see the requirements to open estate accounts.

Share Insurance

A question that often comes up when a member dies is, are the accounts insured? NCUA’s Share Insurance regulation, section 745.5, discusses share insurance for “accounts held by executors or administrators.” Under section 745.5, accounts held in the name of a decedent or in the name of an administrator/executor of an estate are insured, in the aggregate, up to the maximum amount. These accounts are insured separately from other accounts of the beneficiaries or the administrator/executor.

Federal Benefits

Many deceased members receive regular federal benefits payments, such as from social security, prior to their passing. Often, credit unions will receive further federal benefits payments even after the member dies. With some exceptions, credit unions are generally required to return these benefits to the government. Chapter 5 of the Treasury’s Green Book states:

“A Receiving Depository Financial Institution (RDFI) must immediately return any post-death benefit payments received after the RDFI becomes aware of the death or legal incapacity of a recipient (but not post-death benefit payments that the RDFI received before becoming aware of the recipient’s death).”

The Green Book goes into much greater detail into an RDFI’s responsibilities and credit unions may want to further review the Green Book if they are worried about federal benefits payments. There are many other financial considerations for the deceased, including credit card debt, loans secured by real property and more. NAFCU’s Compliance Team can help point credit unions to NCUA and other federal resources to help you navigate these scenarios.