What Are The Problems With Banks Releasing Estate Funds Without Checks?
Karl Taylor, a Probate Executive at Parker Rhodes Hickmotts Solicitors, shared his experiences of this with Today’s Wills and Probate, outlining some of the issues he has encountered and possible solutions that could appease the situation.
The incidents outlined below aren’t specific to one financial institution which demonstrates how wide spread and ultimately damaging this type of practice can be.
Examples of banks releasing funds without conducting proper checks or seeing a Grant.
These examples have been provided by Karl Taylor
Karl was instructed to act in an Estate Administration. The Testator’s Will appointed the children as co-executors. Unfortunately the relationship between the Executors was strained.
Karl proceeded to write to the bank with a standard letter requesting balances and the other information required. The bank duly responded outlining that the account had been closed by the “claimant.” Shocked by this, Karl dug little deeper to find out who had indeed closed the account and why, enquiring as to whether they had seen a copy of the Will and there were in fact multiple executors.
The bank revealed that they had allowed one of the Executors to close the account, pocketing more than £20,000, and didn’t even request sight of a copy Will.
The other Executors were unaware the account had been closed.
Thankfully in this case the money was returned to the estate and dealt with appropriately.
A Will appointed two out of five children as executors. A son of the deceased (not an executor) previously acted as an attorney under an LPA before the testator passed away.
When Karl met the family, he explained that the LPA was no longer valid, so that son didn’t have the authority to close any accounts.
The son who acted as the attorney, visited the local branch of the bank to help his siblings out and inform them of their parent’s death. The deceased’s account held approximately £6,000, and the bank insisted the account be closed that day and passed onto this son. He advised them he had no authority as he wasn’t an executor but the bank insisted and subsequently transferred the funds.
In this instance, the Testator’s nephew had been appointed the sole executor whilst the deceased’s mother was the sole beneficiary.
The deceased also had a brother, who had registered his death. Thinking he was helping out, the brother popped into the local branch to inform them of the passing of the deceased. There and then the bank closed the account and transferred close to £16,000 to him without making any relevant checks to see if the brother was the beneficiary of the estate or the Executor.
In this instance, the beneficiary received the estate.
Karl was instructed by a terminally ill patient to prepare a Will. In this Will, the testator left the bulk of her estate to her partner with cash legacies to her children. Karl’s firm were appointed as Executor.
Sadly the testator passed away soon after. Karl was made aware that her sons had taken all of the paperwork and would be in receipt of the death certificate.
Having some experience of how the banks have been dealing with these cases, Karl was sufficiently concerned to contact Lloyds and explain that his firm was acting as the executors and advised the bank not to close the account and pay the sum of money totalling £60,000 to anyone else.
What are the problems this can cause?
As well as simply being wrong, Karl highlights that the banks are creating numerous problems, including:
- It assists misappropriation of assets. Even if the person receiving the funds is entitled as an Executor or next of kin, these assets may not be declared on the Probate application/Inheritance Tax (IHT) forms.
Other beneficiaries may not know those assets existed so easier to ‘hide’. This should be a concern to individual beneficiaries and charities alike.
- Incorrect submission of asset info on Probate applications/IHT forms. Some individuals incorrectly assume assets already dealt with/closed do not need to be declared on Probate applications/IHT forms.
- If monies released to the wrong person, and that money not correctly dealt with, then creates problems for the genuine Executor/Personal Representative (PRs). This could include ascertaining the estate for IHT purposes/estate distributions.
Also there could be problems if claims against the estate from DWP or others as PRs could be personally liable for any omissions etc.
In extreme cases could give the impression that the estate is insolvent, or there is insufficient money to meet cash legacies etc.
- Assists tax evasion such as inheritance tax
What solutions could be adopted to help reduce these issues?
Karl suggests the following solutions could go a long way to rectify the issues.
- Banks/financial institutions adopt a universal probate threshold. My view is this should be £25K per bank etc.
- Banks themselves learn what probate is and why that is the ultimate authority on who receives closing balances. Why just seeing a copy Will is not sufficient proof. Or that someone saying they are next of kin is not enough. Someone having a death certificate does not mean they are entitled to receive a deceased person’s assets.
This should lead to specialised bank staff who then understand the process and explain to the bereaved why such steps are taken i.e. to protect the money for those entitled to it.
The staff can then ask other questions regarding the estate, such as “is there a property?” The significance is that if so, then probate is always required so they can simply ask for that as well before releasing funds. They should also ask about other assets so they understand the extent better.
It’s clear that in some case they are not even asking if there is a Will.