How to Resolve Account Issues When a Member Dies Presented By: - PowerPoint PPT Presentation

How to Resolve Account Issues When a Member Dies Presented By: Robert Rutkowski, Esq.

Introduction • Problems with paying out money. • Problems with collecting money. 2 | Death of a Member

Introduction • Probate Process • Trust Distribution Process • Credit Union Accounts and Member Death • Credit Union Loans and Member Death • Claims & Remedies – Making an unsecured claim against the estate – Making an unsecured claim against trust assets – Interpleader – Fraudulent transfers 3 | Death of a Member

The Probate Process

The Probate Process • Probating of the will • Appointment of the fiduciary • Marshaling assets • Paying claims • Distribution to heirs 5 | Death of a Member

The Trust Distribution Process

The Trust Distribution Process • Trustee follows instructions of trust documents. • Creditor must be quick to assert claims. • No court supervision. 7 | Death of a Member

Credit Union Accounts and Member Death

Joint Survivorship Accounts • Do not allow members to be confused about joint with right of survivorship (JWROS) accounts as vehicles for probate – All members have total access to account immediately – There must be a signed and dated agreement by all persons indicating intent when shares were issued or thereafter – Not a “convenience account” because it creates an ownership interest in the funds. 9 | Death of a Member

Joint Survivorship Accounts • If one party dies, remaining party is new owner • Death of all owners, save one, terminates account 10 | Death of a Member

Death of Joint Owner • If surviving joint owner is minor, the minor shall be considered as being of the age of majority and having contractual capacity • Check with Executor of estate 11 | Death of a Member

Death of Joint Owner • If life savings insurance is on file, must file claim for proceeds – Proceeds disbursed to beneficiary – Require death certificate – Check credit union (CU) procedures 12 | Death of a Member

Death of Joint Owner • If surviving joint owner ineligible for membership, disburse remaining funds to joint owner 13 | Death of a Member

Joint Survivorship Accounts • Creating joint account without Right of Survivorship – Upon death, funds belong to deceased owner’s estate, designated beneficiary and/or surviving account owners – NOT advisable 14 | Death of a Member

Payable on Death (POD) Membership Accounts • Member enters into contract: member may designate beneficiary who will receive funds when account owner dies 15 | Death of a Member

POD Membership Accounts • Account owner(s) retains sole ownership of account and only he/she may withdraw proceeds or change beneficiary during his/her lifetime • If more than one holder of the account, knowledge or consent of withdrawal or deposit of any part or all of the account at any time is NOT needed 16 | Death of a Member

POD Membership Accounts • Beneficiary’s interest does not vest until owner’s death • Advantage: designated by statute to avoid probate upon owner’s death 17 | Death of a Member

POD Membership Accounts • Funds payable to beneficiary are not part of owner’s estate – May be subject to inheritance or other taxes – More than one beneficiary: hold account in equal shares as tenants in common with no rights of survivorship 18 | Death of a Member

Setting Up a POD Account • Execute a dated written statement with institution expressing the intent of the ward (member) to establish a POD account 19 | Death of a Member

Setting Up a POD Account • Can set up joint owner trust account – If one owner dies, money goes to other owner • Owner may be adult or minor, but must be a natural person 20 | Death of a Member

POD Membership Accounts • Owner makes withdrawals/deposits as desired- retains complete control of POD account • Ability to use funds as security unaffected – Debts secured by POD funds paid first 21 | Death of a Member

POD Membership Accounts • Owner may designate person, entity, or organization as beneficiary • Owner retains complete control over who account beneficiaries are – May change designated person at any time for any reason – Do not need to obtain consent to do so 22 | Death of a Member

POD Membership Accounts • Beneficiary has no right to funds until owner’s death • CU must keep owner’s beneficiary confidential 23 | Death of a Member

Disbursing Funds to Beneficiary upon Owner’s Death • Obtain copy of death certificate • Notify beneficiary for written request of funds in account 24 | Death of a Member

Disbursing Funds to Beneficiary upon Owner’s Death • Require beneficiary to provide proper ID – Hold funds if any doubt 25 | Death of a Member

POD Membership Accounts • If savings insurance providing matching insurance coverage for deposited funds in POD account, CU must file claim for insurance proceeds only 26 | Death of a Member

POD Membership Accounts • Carrier disburses proceeds to individual or entity on POD card/designated beneficiary • If beneficiary is minor, proceeds may only be paid to the minor unless guardian is appointed as the minor shall be considered as being of the age of majority and having contractual capacity 27 | Death of a Member

POD Membership Accounts • Get approval by Treasurer or other authorized CU personnel prior to distributing funds • Remember, you can have more than one beneficiary! 28 | Death of a Member

POD Membership Accounts • Do not confuse beneficiary set for IRA accounts -- they are separate and distinct 29 | Death of a Member

Federal Estate Tax 2014 • Joint Accounts & POD’s are taxed pursuant to the Federal Tax scheme – If probate estate is LESS THAN $5.34 million, no taxes – If probate estate is MORE THAN $5.34 million, the estate will be taxed 30 | Death of a Member

Requirements for Survivorship Features of Accounts • Affidavit of surviving spouse (some jurisdictions or to be safe) • Death certificate(s) • ID (driver’s license) 31 | Death of a Member

Requirements for Survivorship Features of Accounts • Make copies of all forms of ID • Execute check/draft to surviving spouse in his/her name as beneficiary of deceased owner’s account 32 | Death of a Member

Effect of Death • For beneficiary in POD accounts similar to survivorship accounts, need – Death certificate – Beneficiary ID – To make copies of all documents – To execute check/draft to beneficiary 33 | Death of a Member

Claims and Remedies

Claims and Remedies “He that dies pays all debts.” - William Shakespeare , The Tempest • Only if you have default causes for death • Real value in cross-collateralization clauses 35 | Death of a Member

Secured Loans (Auto, Boat, Etc.) • Much better position than unsecured loans. • No default unless loan agreement states death is default event. This is called a default on death clause. • Otherwise, only repossess if loan is delinquent 36 | Death of a Member

Secured Loans (Auto, Boat, Etc.) • File claim with estate • If you do repossess, send all notices regarding sale, etc. to estate fiduciary 37 | Death of a Member

Effect of Death • Obtain following when member dies and Administrator/Executor/Executrix appear to claim funds: – Relevant pages or letters of administration – Court letters of testimony qualification 38 | Death of a Member

Effect of Death • Obtain following ( cont .) – Death certificate(s) – ID of Administrator/Executor/Executrix – Check/draft for Administrator/Executor/Executrix 39 | Death of a Member

Making an unsecured claim against the estate.

File Unsecured Claim against Estate • Typically: – A writing addressed to decedent and received by the executor or administrator of the estate. – After the appointment of the executor or administrator. – Before the final account is filed – Within some period of time (often within 6 months of death). 41 | Death of a Member

File Claim against Estate • Claim can be letter or document designated as “claim” but must contain: – Name of deceased member – CU name and address – Nature of debt – Amount of debt 42 | Death of a Member

Acceptance of Claim • If claim accepted, you will either be paid in the ordinary course or if the estate is insolvent, paid a percentage of the claim or paid if assets are discovered. • When there are not enough liquid assets to pay claims, creditors paid according to priorities established by law and real property and other personal property may be sold to satisfy claim 43 | Death of a Member