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#2071368 - 03/29/16 04:28 PM Business Owner Deceased, Executor wants to Sign
Dani York, CRCM Offline
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Dani York, CRCM
Joined: Apr 2005
Posts: 3,663
TN
Today a gentleman came into our main office and requested to be made a signer on one of our business accounts. The business was owned by his father who passed away a little over a month ago. The account was opened in 2000 by an inept employee so we don't have any corporate papers. The account is setup as a Corporation (Inc), and we only have the original signature card and an incomplete bank prepared corporate resolution. The bank prepared corporate resolution was signed by the deceased owner and lists a second person as VP/Treasurer, but that second person never signed anything. Only the deceased owner signed the signature card.

The son said the business is actually an LLC. I can find no Secretary of State filing record for a corporation or LLC in the business's name in TN or GA, and a Google search hasn't yielded anything that would point me to another state for a filing. The business does have its own TIN.

The son/executor produced the death certificate and Letters of Administration from the Probate Court. He said all he wants to do is change take his father's place as the account signer. He also said his lawyer told him all he needed to do was produce the letters and death certificate. Unfortunately, I can't just go by what his lawyer told him.

In the past I've only seen deceased owners removed by virtue of amended corporate papers, etc, so I'm unsure how to handle this scenario. I have found some information regarding intestate succession where the estate can/would "take over" in place of the deceased signer/owner. I am willing to set up the card and signature authority with the estate as the new signer, but am unsure how to set that up on the signature card. Would it be something like how we set up a POA? Like "John Doe Jr, Executor of John Doe Sr Estate"?



ETA: The son says they have no idea where any paperwork is. They didn't find a will or any corporate papers anywhere, so they can't produce anything showing the business is a corporation or an LLC. So now I'm wondering if we should treat it like a sole proprietorship?
Last edited by Dani York, CRCM; 03/29/16 04:31 PM.
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#2071375 - 03/29/16 05:00 PM Re: Business Owner Deceased, Executor wants to Sign Dani York, CRCM
edAudit Offline
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edAudit
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He also said his lawyer told him all he needed to do was produce the letters and death certificate. His lawyer is mistaken. That is never the answer.

Sorry to say that if you can not locate corporate filing documents. I need to give you a bad answer and that would be to contact your banks legal council..


sorry
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#2071445 - 03/29/16 06:47 PM Re: Business Owner Deceased, Executor wants to Sign Dani York, CRCM
Dani York, CRCM Offline
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Dani York, CRCM
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TN
No problem Ed. I figured as much. Thanks!
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#2071484 - 03/29/16 08:19 PM Re: Business Owner Deceased, Executor wants to Sign Dani York, CRCM
Elwood P. Dowd Offline
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This is random, but you may want to search on the TIN and see if you get any kind of a hit or identifier. If we were not already stuck with the leavings of an inept employee, an SSN would suggest it's a sole proprietorship or a single member LLC. An EIN would leave "all of the above" types of business formations as possibilities.

My only suggestion is well meaning: This is their problem to resolve, not yours. Let them do the legwork and provide you with documentation regarding the nature of the business. My guess is that they will eventually assert that it's a sole proprietorship. Then, you will accept the court order and the personal representative's authority to act when the personal representative executes an affidavit that the business was a sole proprietorship and is, thus, part of the decedent's estate as his personal property. If you have no evidence to the contrary, your attorney might agree that is reasonable.

My flexibility is spawned in part on the assumptions that 1) there is very little money involved and 2) the account has been inactive for some time.
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#2071496 - 03/29/16 08:48 PM Re: Business Owner Deceased, Executor wants to Sign Dani York, CRCM
Dani York, CRCM Offline
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Dani York, CRCM
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TN
I did try to Google search the TIN with no hits. Even tried a couple of TIN lookup sites (SEC and FEIN Search), with no hits.

The account is low dollar (around $1500.00 per month), but does actively receive ACH credits. The deceased owner sold insurance and this account was used to receive his residual commissions on the policies he sold. Typically $1000 to $2000 per month in credits. The deceased would write a check once a month to move the money to an account at another bank, in effect taking his owner draw or whatever.

Based on conversations with the executor, it looks like they are looking to this residual income that is funding this account to support the surviving spouse. He just wants to move the money on a monthly basis to the estate account for distribution to the surviving spouse. So now we have the added issue of this may be the primary source of support for mom.

Based on what I found regarding intestate succession law, even in an corporation, the deceased's shares become property of the estate. I have asked the son/executor to look at his father's tax returns and see how he filed (K1, 1065, or schedule C). Hopefully that will give us the information that we need to proceed.
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#2071505 - 03/29/16 09:32 PM Re: Business Owner Deceased, Executor wants to Sign Dani York, CRCM
Elwood P. Dowd Offline
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Okay, assumptions wrong; flexibility went with them.

Very good idea on the tax returns. Presumably, the insurance company did some sort of information reporting to whomever they thought they were making the payments.

However, if the payments were made to an individual, I doubt that insurance companies are obligated to make payments to their agents with a right of survivorship in a surviving spouse. It's entirely possible that if the insurance company knew their agent was deceased, the payments would simply stop. Given the way they first approached you, I am twice as cynical as necessary to believe the personal representative and his legal counsel are well aware of that.

This is still their problem to resolve. I encourage you not to facilitate the personal representative's "takeover" of an account owned by the decedent. His job is to close the decedent's accounts and marshall the assets in the name of the estate.. If the surviving spouse is entitled to a payment, they can notify the insurance company and let the insurance company make it directly to her.

There is some potential that you are going to end up being "the bad guy" here. Better that than unintentionally facilitating a fraud.
Last edited by Ken_Pegasus; 03/30/16 01:04 PM.
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#2071532 - 03/30/16 11:38 AM Re: Business Owner Deceased, Executor wants to Sign Dani York, CRCM
John Burnett Offline
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The other thing to check, Dani, is the information that accompanied the ACH credits to the account. The name of the intended beneficiary often accompanies such payments. Unlike SSA payments, though, you can't expect an SSN or TIN to be included.

I share Ken's suggestion that it's unlikely that insurance premium residual payments continue after the agent's demise, so the insurance company or companies in question are probably unaware of the death in this case. Now that your bank is aware, however, you should avoid any arrangement that facilitates the diversion of these funds to another account.

I encourage you to put the burden back on the executor to determine and document the true nature of the business involved in this scenario, and to avoid taking counsel from his attorney.
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#2071539 - 03/30/16 12:41 PM Re: Business Owner Deceased, Executor wants to Sign Dani York, CRCM
Dani York, CRCM Offline
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Dani York, CRCM
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TN
Thank you both. I have checked the ACH entries. The majority are "payable to" the business name. There were 2 that were "payable to" the deceased's personal name, but the last time those posted was in February, none for March. We have already flagged the account as "Deceased" so that all the credits will drop into non-post and the ACH department will return anything with the personal name to the originator as "deceased".

We will be giving the executor contact information for the ACH originators so he can contact them and get everything resolved. I did have another conversation with him late yesterday about the names on the ACH entries. I also explained again the importance of determining the type of business entity, especially since I find no record of a state filing, and the potential issues associated with how the business is handled if in fact it is a sole proprietorship (ie the business died with his father and that could effect the residual income from the insurance company).

I have talked to management about the issues. The ball and decision is now in their court on how they want to proceed.

Thank you so much for the help.
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#2072705 - 04/06/16 06:16 PM Re: Business Owner Deceased, Executor wants to Sign Dani York, CRCM
LSmith Offline
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My two cents is, If the Corporation or LLC is not registered with the SOS, then it is not a valid Corporation and should be treated as a disregarded Sole Proprietorship or LLC. In that case, at death of owner, this account becomes a part of his estate. This account would need to be part of probate. As Executor, the son needs to close this account and open an Estate account until all funds can be disbursed. Depending on your state law, there are certain amounts that can be disbursed directly to nearly relative. In Mississippi those statutes are, Mississippi Statute 81-5-63 & 1-10-06

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#2072711 - 04/06/16 06:28 PM Re: Business Owner Deceased, Executor wants to Sign Dani York, CRCM
rlcarey Online
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I would not put the bank in that position. I would tell him he needs present the information that he has to the probate judge and obtain a court order as to the disposition of funds.
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#2072712 - 04/06/16 06:29 PM Re: Business Owner Deceased, Executor wants to Sign Dani York, CRCM
John Burnett Offline
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Hold on there a bit. "Disregarded" and "sole proprietorship" don't belong in the same sentence. There is no such animal. An account of a deceased sole proprietor becomes part of the decedent's estate unless (1) it's one of those definitionally-challenged sole props set up in a state like Oklahoma that permits married couples to call themselves sole props if they haven't formed a partnership; or (2) the owner has set it up with a POD beneficiary.

"Disregarded LLC" is a catch phrase that describes a single-member LLC that's elected to be disregarded by the IRS for purposes of taxation, so that its income and expenses are captured for the IRS via the member's personal tax returns. The account of a single-member LLC doesn't become part of the decedent's estate. The LLC becomes part of the estate and will likely be dissolved, but the personal representative of the estate can't just take the account over, and it won't be covered by small estate statutes.
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#2220840 - 09/03/19 06:12 PM Re: Business Owner Deceased, Executor wants to Sign Dani York, CRCM
ComplyGuy Offline
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I'd like to follow up on this as we have a very similar situation.

The individual customer passed away. He maintained an account here that was owned by an LLC. Now, the estate's executor is wanting to move the funds from the LLC account.

I understand that the account will not become part of the estate. But, the LLC was administratively dissolved 4 years ago for not filling the proper annual filings. So, legally there is no LLC, but our account is still technically owned by the LLC.

What kind of documentation would we need to allow the executor to move these funds?

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#2220843 - 09/03/19 06:30 PM Re: Business Owner Deceased, Executor wants to Sign Dani York, CRCM
rlcarey Online
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What kind of documentation would we need to allow the executor to move these funds?

Much of this might be based on State law so as much as I hate to say it - you really need your legal counsel in on this one.
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