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Account for Institutionalized Customer

Question: 
Our bank currently handles accounts for a mental institution which tracks accounts for its clients. It sort of serves as the custodian. The account is opened using the client's SSN, but he does not have access to the account and is not a signer. There has been a debate as to whether the client should be listed as an owner because we are using his Social. But my feelings are that if he is listed as an owner, he is automatically a signer, therefore having access to the account. Can you clarify the difference between owner and signer for us?
Answer: 

Answer by John Burnett:

Welcome to the world of gray!

If funds are deposited to an account by a fiduciary or agent and the bank knows who the true owner of the funds is, I would call the true owner of the funds the "owner" for my account records. I would call the fiduciary or agent a signer.

Some owners will be signers. Others will not. For example, in an UTMA account, the minor is the beneficial owner of the funds, but the minor is not a signer. The creates the cozy little paradox where funds in the account cannot be attached without extra court maneuvering, since the funds don't belong to the custodian (so you cannot attach in the custodian's name) and the funds can't be reached by the minor (so you can't attach in the minor's name, either).

With a POA, both parties are signers but only the principal is the owner.

With a corporate account, the corporation is the owner, but the corporation cannot sign anything. Therefore, it appoints agents who are signers but not owners.

If a court appoints a custodian/guardian for an incompetent, the ward is the owner, but cannot sign, and the fiduciary is a signer but not an owner.

If a lawyer sets up an escrow account for a specified client (not an IOLTA), the lawyer (your customer) is the signer/owner of the account but not the owner of the funds, and the client is the beneficial owner of the funds.

Someone with a clearer understanding of beneficial ownership can split the lines more finely, but this will serve to show that this is not a black and white question.

Answer: 

Answer by Ken Golliher:

John has done a good job of cataloging a number of situations where ownership and access do not coincide. A representative payee account be another example, as would be the patient accounts nursing homes are required to establish.

In your case, I would list the patient/inmate as owner with the understanding that does not mean he or she has access to the funds.

First published on BankersOnline.com 07/07/03

First published on 07/07/2003

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