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#46137 - 11/29/02 05:54 PM Guardianship Account

Attorney opens guardianship account for his parent, writes check on his trust account for 189M and deposits into guardianship account. Court order says nothing is to be paid out of guardianship without further order of court. In order to ensure that funds are FDIC insured per the court order, he writes check on this account payable to another bank for 95M. Check is in today and due to this technicality I am in a predicament. I understand the principle behind what he is doing and the stress he is under because he is dealing with parents. His father is contesting this thru the courts and has a hearing on 12/9/02. I do not feel comfortable paying the check because of the court order even when I have no reason to think the attorney did anything besides write us a check for the whole amount belonging to his parents and then writing a check on the guardianship account to another bank just to have it FDIC insured. Our counsel's office appears to be closed today and senior officers are not available. What should I do?

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General Discussion
#46138 - 11/29/02 06:05 PM Re: Guardianship Account

I would suggest informing the customer that you can't honor the check without a court order. I would further suggest that you point the customer in the direction of a company that sells insurance for the non-FDIC-covered portion of the deposit. While he would not be able to use the funds already deposited to insure said money, I'm sure the premiums would be quite trivial.

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#46139 - 11/29/02 07:17 PM Re: Guardianship Account
KSK Offline
Gold Star
Joined: Jul 2001
Posts: 357
I would not honor the check without court approval. Contact the attorney/son and explain that the court order prevents any withdrawals with the authorization of the court. Be up-front with the attorney and explain that your institution is compliant with minimum capital requirements (I am assuming that it is) and that the likelihood of the FDIC taking over your institution between now and the time he is able to obtain court approval is minimal. The risk is far greater to your institution for failure to adhere to the court order for allowing the check to be honored.

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#46140 - 11/29/02 07:26 PM Re: Guardianship Account

Told him that already, but I agree with you our liability is going against the court order no matter what good intentions are involved in the opening of the other account at the other bank. Thank you for your responses.

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#46141 - 12/02/02 02:25 PM Re: Guardianship Account
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 40,086
Cape Cod
Before reading further, note that I am not an attorney.

One question might shed a little light on your quandary, although I suspect you had to make your decision already. Against whom is the court order directed? Better put, does the court direct that the bank not allow withdrawals, or is the order phrased such that the son/attorney not remove the funds from the guardianship accounts?
John S. Burnett
Fighting for Compliance since 1976
Bankers' Threads User #8

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