Banks and the Probate requirement

It is very common for banks to request the Grant of Probate or Grant of Letters of Administration before they release bank funds held by deceased customers. So common in fact that most major banks, and even smaller banks, have entire departments dedicated to processing deceased estate paperwork.

The requirement for probate is a form of risk management, whereby banks will request the appropriate legal personal representative to obtain a copy of either a Grant of Probate (where a will was left) or a Grant of Letters of Administration (in cases where no will was left) before they are prepared to release deceased estate bank funds.

A common question we are asked is “Isn’t a copy of the will not good enough for the bank?”

There are many innocent, and not so innocent, reasons why the bank may not be satisfied with only a copy of the will, and may insist on being provided a copy of the Grant of Probate. These include the possibilities of forgery or identity fraud, as well as the possible existence of a newer will.

Banks are often prepared to release funds without the Grant of Probate or Grant of Letters of Administration in circumstances where the balance of bank funds is below certain thresholds (for example, in the range of $1 - $15,000). In these cases, banks are often prepared to release funds to close family members provided they have executed an indemnity form which protects the bank from future legal claims. However, each bank has its own risk tolerance and policies when it comes to waiving the requirement for probate, and the decision to waive this requirement is subject to the bank’s exercise of its discretion.

Forms of accounts

Bank accounts are usually held in one of two ways:

1. Joint bank accounts

Due to the “right of survivorship”, probate is not required for the release or transfer of bank funds which are held in a joint account with a surviving holder. This means that the surviving holder becomes entitled to these funds, irrespective of the contents of the deceased holder’s will. Typically, once a bank is notified and satisfied of the death of one of the joint-account holders, the surviving owner becomes the sole account holder for the entirety of the account.

2. Solely held accounts

Unless the funds are of a minimal value, banks will typically request a copy of the Grant of Probate or Letters of Administration, before they release funds held solely in the name of one person. Each individual bank will have a balance threshold above which they will require evidence of probate or letters of administration having been granted. Will makers are able to bequeath these funds to beneficiaries either through a specific bequest, or through a “catch-all” residuary clause in their will.

Authorities to Access accounts

We are often contacted by relatives of recently deceased bank account holders who have access to such accounts on the basis of “third party authority”. Until and unless a bank is formally informed of the death of the account holder, these accounts remain operational, allowing third party authorities access to funds of deceased account holders.

In such circumstances, it is always advisable to notify the bank of the passing of the account holder and, if appropriate, to formally request the release of the bank funds. Whilst a third party authority might have the practical ability to access the deceased’s funds, in most cases they would not have a legal right to access such funds before probate or letters of administration is granted. In cases where formal approval has not been sought, or provided, unauthorised access to deceased estate funds may have legal repercussions and is best to be avoided.

Where do the funds lie?

For the purpose of probate or letters of administration applications it is important to determine the “location” of the bank account in question. This will determine which State Supreme Court has the jurisdiction to issue the Grant and, consequently, which legal processes and fees will apply.

For the purpose of probate application, the BSB numbers of bank accounts reflect the location where a bank account was set up, and for the purposes of probate law, where the funds “lie”.

Deceased estate bank accounts

Once a bank is notified of the passing of an account holder, it will typically “freeze” any accounts held solely in the name of the account holder. These accounts will usually still be able to receive funds, but access to the accounts will be denied unless and until a copy of the Grant of Probate or Letters of Administration is presented to the bank. Allowance will often be made in respect to the release of certain funds for the deceased’s family members to cover any funeral and legal expenses.

It is useful to know that deceased estate bank accounts are also capable of banking cheques made payable to the “estate of the deceased”.

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