18 Hoosier Banker March 2015 COMPLIANCE CONNECTION aBoUT coMPLiance connecTion In order to address compliance inquiries from members, IBA provides Compliance Connection, an assistance program offering advice on Indiana-specific compliance questions. If the matter requires legal advice, IBA Compliance Connection will refer the bank to a law firm. The material in this issue was prepared by Larry C. Tomlin, partner with Krieg DeVault LLP, Indianapolis, and IBA compliance consultant. Submit Compliance Connection questions to IBA’s Amber R. Van Til at avantil@indianabankers.org. Question: One of the bank’s customers has recently passed away. His deposit account was transferable on death to his adult children. One of the children has requested that her share of the account be paid to her immediately; however, the bank has not received instructions from the decedent’s personal representative to distribute the account. May the bank distribute the account in accordance with this beneficiary’s request? What is the bank’s potential liability if the personal representative later objects? Answer: The acceptance of transfer on death designation by the bank constitutes an agreement between the bank and the owner of the account (“Owner”) that the Owner’s property will be “transferred to and placed in the name and control of the beneficiary in accordance with the beneficiary designation or transfer on death direction.”1 This agreement is governed by the Transfer on Death Property Act (“Act”),2 which establishes the rights of the beneficiaries to the account, the obligations of the bank, and the protections afforded to the bank in fulfilling its obligations under the agreement. A transfer on death is not a testamentary transfer, nor is it “subject to the requirements for a will or for probating a will.”3 Accordingly the Act does not require the bank to receive instructions from the personal representative before distributing the account to the beneficiaries. The bank may distribute the account “with or without a written request for execution.”4 If the request is written, the bank may “rely and act on a request made by a beneficiary, or a beneficiary’s attorney in fact, guardian, conservator, or other agent” without verifying the information contained in such request.5 In doing so, the bank may rely on: • A certified or authenticated copy of a death certificate issued by an official or an agency of the place where the death occurred as showing the fact, place, date, and time of death and the identity of the decedent; and • A certified or authenticated copy of a report or record of any governmental agency that a person is missing, detained, dead, or alive, and the dates, circumstances and places disclosed by the record or report.6 Further, the bank may distribute the account to the beneficiaries without regard to any knowledge of a claim adverse to the distribution unless, within a reasonable time prior to making such distribution, the bank receives a written notice: • Asserting a claim of beneficial interest in the transfer adverse to the transfer to be made; • Giving the name of the claimant and an address for communications directed to the claimant; • Identifying the deceased owner; and • Stating the nature of the claim as it affects the transfer.7 In addition to any other protections that the bank may have under Indiana law, the Act discharges the bank from all claims for the amounts paid, if the transfer was made under the Act, in good faith and in reliance upon information the bank reasonably believed to be accurate.8 The Act does not, however, limit the ability of a beneficiary to bring an action against a party other than the transferring entity or concerning the ownership of property transferred under the Act. As such, if a beneficiary believes that the account has been improperly distributed, the beneficiary may bring an action in probate court to obtain the return of the money and any income earned on the money from the person to whom it was transferred.9 t This information is provided for general education purposes and is not intended to be legal advice. Please consult legal counsel for specific guidance as to how this information applies to your institution’s circumstances or situation. 1 ind. code § 32-17-14-8(a). 2 Id. §§ 32-17-14-0.2 to -32. 3 Id. § 32-17-14-5(2) and (3). 4 Id. § 32-17-14-27(b). 5 Id. § 32-17-14-27(d). 6 Id. § 32-17-14-27(c). 7 Id. § 32-17-14-27(f). 8 Id. § 32-17-14-27(f). 9 Id. § 32-17-14-31(b)(2). Charles E. Thompson, 65, retired senior vice president and chief operating officer of Commerce Bank, Evansville, died Dec. 13, 2014. Early in his career, Thompson served as an internal auditor at Monroe County Bank, Bloomington, where he worked for more than 15 years. He later helped found Commerce Bank, where he served until his retirement last year. Thompson was a member of several nonprofit boards, including the Hoosier Hills Food Bank, for more than 20 years. He was a graduate of Indiana University and a member of the Indiana Bankers Association Forty Year Club. t in MeMory oF
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