When a joint accountholder dies, what is the usual procedure for setting up new signature cards?

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Question:

When a joint accountholder dies, what is the usual procedure for setting up new signature cards? Example: John or Jane Doe has an account with John's social security number listed first, and John dies. Some customers never come in to change the account, and we eventually call them and ask them to come in and do new signature cards. We have a trust account now that the husband died, but do we automatically draw up new signature cards, or what?

Answer:

In the case of an account owned by multiple individuals, when one dies, the preferred practice is to close the original account and open a new one. The rationale is that checks written by the decedent (and perhaps ACH entries) may be presented long after death. Since most checks are not physically inspected prior to payment, the items would be paid and it would be difficult for the bank to argue it exercised reasonable care in paying them. (Regardless of what practice is "preferred," many banks do not enforce the policy when a signatory dies, only when a signatory is otherwise removed.)

Trusts do not offer such easy answers - it depends entirely on the terms of the trust. If Bonnie and Clyde are co-trustees and Clyde dies, the trust may continue without interruption. Bonnie may continue as the sole trustee, so the bank's incentive to obtain a new card is pretty limited. Alternatively, the trust may provide for a successor trustee to take Clyde's place. In short, you do not automatically do anything. Take a look at the trust synopsis you hopefully obtained when the account was opened and go from there.

First published on BankersOnline.com 12/2/02