Check Handling Do s and Don ts...Your State Association Presents Check Handling Do’s and Don’ts Program Materials Use this document to follow along with the webinar presentation

Your State Association Presents

Check Handling Do’s and

Don’ts

Program Materials

Use this document to follow along with the webinar

presentation. Please test your system before the broadcast. Be

sure to print enough copies for all listeners. Supplementary

documents are provided as an additional reference here.

Friday, May 6, 2016 Presenter: Deborah L. Crawford

Technical Support (for faster service please submit inquiries via email or online): (Registration & Tech Support): Email- [email protected], Phone- (877)988-7526 FOR ADDITIONAL ASSISTANCE PLEASE REFER TO OUR FAQs

https://od.lk/f/NF8xMjQ3NjI0NzZf

mailto:[email protected]

https://bankers.confedge.com/ap/eSite/?i=faq

1

©Gettechnical Inc.1

Do’s and Don’ts on Checks

Frontline

2016

The material used in this text has been drawn from sources believed to be reliable. Every effort has been made to assure the accuracy of the

material; however, the accuracy of this information is not guaranteed. The laws are often changed without prior notice from the government. The

publisher and the editor are not engaging in the practice of law or accounting. We are not responsible for the actions of your company's

employees.

2

AgendaAgendaAgendaAgenda


3

-Endorsements

-Business Checks

-Deceased payees

-Time frames and deadlines

-Signature card issues

-Wrongful return

-Withdrawal rights

-Authorized signers

-POAs

-Offset

-10 Rules of Thumb


4

Endorsement and other Check

Questions


5

How do you spell

endorsement/indorsement?

The legal spelling of the word is indorsement. It

was changed with Regulation CC and adopted by

many state legislatures. You will see it spelled

both ways.


6

Do make sure checks are

endorsed

Don’t stamp it unless the account

holder is not present.

6©Gettechnical Inc.

7

Does an endorsement require a

signature?Yes and here is the relevant statute.

§ 3-204. INDORSEMENT.

(a) "Indorsement" means a signature, other than that of a signer as maker, drawer, or acceptor, that alone or accompanied by other words is made on an instrument for the purpose of (i) negotiating the instrument, (ii) restricting payment of the instrument, or (iii) incurring indorser's liability on the instrument, but regardless of the intent of the signer, a signature and its accompanying words is an indorsement unless the accompanying words, terms of the instrument, place of the signature, or other circumstances unambiguously indicate that the signature was made for a purpose other than indorsement. For the purpose of determining whether a signature is made on an instrument, a paper affixed to the instrument is a part of the instrument.

(b) "Indorser" means a person who makes an indorsement.

(c) For the purpose of determining whether the transferee of an instrument is a holder, an indorsement that transfers a security interest in the instrument is effective as an unqualified indorsement of the instrument.

(d) If an instrument is payable to a holder under a name that is not the name of the holder, indorsement may be made by the holder in the name stated in the instrument or in the holder's name or both, but signature in both names may be required by a person paying or taking the instrument for value or collection.


8

Can we stamp a check for the account

holder?

As the financial institution of first deposit, when you accept a check for deposit you warrant the check when you send it forward for collection.

So the reason we stamp a check “Guaranteed Endorsement for the within Named Payee” is so that the financial institution down the road does not return it MISSING ENDORSEMENT.

It is always better to have the account holder endorse the check but sometimes the stamp is used when it is low risk.


9

Who generally takes the loss on a forged

endorsement?

Typically the financial institution of first deposit

is the financial institution who should have

identified the endorsers on a check.

Check your state law:

Transfer and Presentment Warranties

UCC 3-416, 3-417, 4-207 and 4-208

Time limits: 3-118 and 4-111


10

What if the check is made payable to the

account holder’s nickname? How should it

be endorsed?

If the check is made payable to Pete Smith but

his real name is Paul Smith, have the account

holder sign the check both ways.


11

Names Do Not Match

Nicknames:

First as it was written, and then correct

name.

11

12

What if our account holder has married and the check

is made payable to her old name? How should check

be endorsed?

Same answer as above. Have the account

holder sign the check both ways.


13

Names Do Not Match

First as it was

written, and then

correct name.

13

14

Can we deposit checks made payable

to a person into a business account?

Yes have the account holder sign the check over

to the business.

Joe Smith

Pay to ABC, Inc

Then have business endorse.


15

We get insurance checks made

payable to Joe and Betty and ABC

Bank. Who endorses?

You will have all three endorse the check. Joe,

Betty and whoever is acting for ABC Bank.

You can put a “reasonable cause” hold on this if

you are unable to verify the endorsement of a

joint payee.


16

Is “For Deposit Only” a good

endorsement?

UCC 3-204 requires a signature as mentioned

earlier. However, except for the insurance drafts

you can take a check that matches the account

under the UCC 4-208 that says the bank made

sure the person got the funds.

This makes it important that the checks match

the account.


17

Is there a case where the check may

not match the account it is going in?

Not often…..but something like a collection

agency account. But in that case you would

have an agency agreement that ways that the

agent can deposit checks for the owner.

Or

Third party checks which nobody likes. But you

would have the endorsement as long as it is

good.


18

Do checks made payable to “Cash”

have to be endorsed? Can you stop

payment on a “Cash” check?

No it does not need to be endorsed, since it is a bearer instrument it is already negotiated. However internal procedures usually require the person we are giving the money to endorse so we know who got the money.

Yes you can stop payment, you have the check number, amount, and who made payable to. But you cannot stop the account holder’s obligation whoever bears the check is entitled to the funds so it might be a waste of time.


19

What kind of endorsements are legal?

In most state laws you see…

1. Blank—check endorsed by payee

2. Special—check is endorsed by

payee and made payable to

identified person

3. Restrictive—For Deposit Only

19

20

Blank

endorsement

20

21

Special

endorsement

21

22

Restrictive

endorsement

22

23

When a check is not clear is it an “or”

check?This is state law. It is usually an “or” check but watch out for insurance drafts and any remaining treasury checks. Treasury checks usually are “and” checks.

§ 3-110. IDENTIFICATION OF PERSON TO WHOM INSTRUMENT IS PAYABLE.

(d) If an instrument is payable to two or more persons alternatively, it is payable to any of them and may be negotiated, discharged, or enforced by any or all of them in possession of the instrument. If an instrument is payable to two or more persons not alternatively, it is payable to all of them and may be negotiated, discharged, or enforced only by all of them. If an instrument payable to two or more persons is ambiguous as to whether it is payable to the persons alternatively, the instrument is payable to the persons alternatively.


24

What about checks that say “VOID

after 90 Days”?

In your signature card agreement, you will have

a paragraph that should address this issue. You

do not have to pay attention to legends

anymore.


25

We receive checks payable to “The Family of John

Doe” after funerals. Who can endorse?

It is a lovely thought but you still have the

problem of who is the “Family”. It puts you in

the situation of having them open a nonprofit

organization for these checks.

It would be better if the checks were payable to

the spouse or individual handling funeral.


26

Business Checks


27

Do have the business check

deposited.

Do not cash business checks or

deposit into personal accounts.


28

Can a business owner get “less cash”

or cash a check made payable to the

business?

No. There is not a “less cash” box on the

deposit slip and there is a reason for it. Checks

made payable to an entity should be deposited

in full into the entity’s account


29

Can a check made payable to financial

institution be deposited into a

personal account or used to open a

new account?

You may see a check made payable to the

financial institution to pay a loan or open an

account.

You should not have checks made payable to the

financial institution cashed for a account holder.


30

Can a check made payable to financial

institution “fbo” account holder go in

account holder’s account?

This is usually an IRA account--transfer or direct

rollover to an IRA at your financial institution.

These should not go into personal accounts or

be cashed for the account holder.


31

How can a business get petty cash?

Issue the check payable to employee with Petty

Cash in the memo. Or give employee check

made payable to cash.


32

How can a bookkeeper be authorized

to get a balance?

Usually on the resolution for the business you

can have special instructions inserted so that the

bookkeeper is authorized by the business to get

money.


33

How is this check endorsed? Can it be

deposited into the personal account of

Joe Smith?

Sole

Proprietorship

Check 1:

33

For Deposit Only

Floral Enterprises

Joe Smith, Owner

34

How is this check endorsed?

Can it be deposited into a business

account?

A personal account?

Sole

Proprietor

Check 2:

34

For Deposit Only

Joe Smith

Floral Enterprises

35

How is this check endorsed? Can a

partner get money back? No

Can it be cashed?

Can it be deposited into a personal

account?

Partnership

Check:

35

For Deposit only

Johnson Enterprises

36

Corporate Check:

How is this check

endorsed? Can it be

cashed? NO Can it be

deposited into Betty’s

personal account? NO

Can she get less cash?

NO

36

For Deposit Only

Johnson Enterprises Inc

37

Deceased Check Issues


38

Do make sure that a living person

endorses a check.

Do not let the spouse sign the check

and deposit into a previously joint

account.


39

When do we know a account holder is

deceased? It is usually “knowledge”.§ 4-405. DEATH OR INCOMPETENCE OF CUSTOMER.

(a) A payor or collecting bank's authority to accept, pay, or collect an item or to account for proceeds of its collection, if otherwise effective, is not rendered ineffective by incompetence of a customer of either bank existing at the time the item is issued or its collection is undertaken if the bank does not know of an adjudication of incompetence. Neither death nor incompetence of a customer revokes the authority to accept, pay, collect, or account until the bank knows of the fact of death or of an adjudication of incompetence and has reasonable opportunity to act on it.

(b) Even with knowledge, a bank may for 10 days after the date of death pay or certify checks drawn on or before that date unless ordered to stop payment by a person claiming an interest in the account.


40

Check To A Deceased Person

Who can handle a check to a deceased person? It is the executor or personal representative with proper authority to acts for the decedent.

40

41

Need Letters

Testamentary or

Letters of

Administration

41

42

Can a spouse endorse a check for the

decedent?

Not unless he or she is the personal

representative of the estate.


43

Can we clear checks the decedent

wrote before death?

You can clear checks for 10 days after death for

your decedent account holder.


44

Can we stamp a check for account

holder who is deceased and put it in

his or her joint account?

The check belongs to the estate not to the joint

owner on the account.


45

We received a check for $25,000 made payable to

Mary Smith and she is deceased. The husband wants

to deposit this to the trust. Can we?

No this check now belongs to her estate. So

only the executor of the estate can deposit it

into an estate account. The husband may have

been better served to have the person who it

was made payable to to reissue the check to the

trust.


46

Time Frames, Dates and other legal

issues


47

Do be careful about timeframes.

Do not think you can slide something

by another financial institution. They

know the rules.


48

What are the time frames for

forgeries, forged endorsements and

other issues?

48

49

Deadlines & Liabilities

49

Account holder

writes check to

Target

Target deposits

check at financial

institution

Federal Reserve

Clears through various

institutions

Hits financial

institution check

drawn on

Account holder

comes into

financial

institution and

signs contract

50

What you have to know: Check your state

statue

Checks have to be returned by the midnight

deadline

A financial institution must tell you when a

large item is being returned by 4pm

Statute of limitation is 3 years in most states on

forged endorsements

account holder must tell you in 30 days on a

forgery or alteration in most states

50

51

What are time frames for a stop

payment?§ 4-403. CUSTOMER'S RIGHT TO STOP PAYMENT; BURDEN OF PROOF OF LOSS.

(a) A customer or any person authorized to draw on the account if there is more than one person may stop payment of any item drawn on the customer's account or close the account by an order to the bank describing the item or account with reasonable certainty received at a time and in a manner that affords the bank a reasonable opportunity to act on it before any action by the bank with respect to the item described in Section 4-303. If the signature of more than one person is required to draw on an account, any of these persons may stop payment or close the account.

(b) A stop-payment order is effective for six months, but it lapses after 14 calendar days if the original order was oral and was not confirmed in a record within that period. A stop-payment order may be renewed for additional six-month periods by a record given to the bank within a period during which the stop-payment order is effective.

(c) The burden of establishing the fact and amount of loss resulting from the payment of an item contrary to a stop-payment order or order to close an account is on the customer. The loss from payment of an item contrary to a stop-payment order may include damages for dishonor of subsequent items under Section 4-402.


52

When does a check become stale

dated?

§ 4-404. BANK NOT OBLIGED TO PAY CHECK

MORE THAN SIX MONTHS OLD.

A bank is under no obligation to a customer

having a checking account to pay a check, other

than a certified check, which is presented more

than six months after its date, but it may charge

its customer's account for a payment made

thereafter in good faith.


53

Can we create an overdraft on an

account?§ 4-401. WHEN BANK MAY CHARGE CUSTOMER'S ACCOUNT.

(a) A bank may charge against the account of a customer an item that is properly payable from that account even though the charge creates an overdraft. An item is properly payable if it is authorized by the customer and is in accordance with any agreement between the customer and bank.

(b) A customer is not liable for the amount of an overdraft if the customer neither signed the item nor benefited from the proceeds of the item.

(c) A bank may charge against the account of a customer a check that is otherwise properly payablefrom the account, even though payment was made before the date of the check, unless the customer has given notice to the bank of the postdating describing the check with reasonable certainty. The notice is effective for the period stated in Section 4-403(b) for stop-payment orders, and must be received at such time and in such manner as to afford the bank a reasonable opportunity to act on it before the bank takes any action with respect to the check described in Section 4-303. If a bank charges against the account of a customer a check before the date stated in the notice of postdating, the bank is liable for damages for the loss resulting from its act. The loss may include damages for dishonor of subsequent items under Section 4-402.

(d) A bank that in good faith makes payment to a holder may charge the indicated account of its customer according to:

(1) the original terms of the altered item; or

(2) the terms of the completed item, even though the bank knows the item has been completed unless the bank has notice that the completion was improper.


54

§ 4-402. BANK'S LIABILITY TO CUSTOMER FOR WRONGFUL DISHONOR; TIME OF DETERMINING INSUFFICIENCY OF ACCOUNT.

(a) Except as otherwise provided in this Article, a payor bank wrongfully dishonors an item if it dishonors an item that is properly payable, but a bankmay dishonor an item that would create an overdraft unless it has agreed to pay the overdraft.

(b) A payor bank is liable to its customer for damages proximately caused by the wrongful dishonor of an item. Liability is limited to actual damages proved and may include damages for an arrest or prosecution of the customer or other consequential damages. Whether any consequential damages are proximately caused by the wrongful dishonor is a question of fact to be determined in each case.

(c) A payor bank's determination of the customer's account balance on which a decision to dishonor for insufficiency of available funds is based may be made at any time between the time the item is received by the payor bank and the time that the payor bank returns the item or gives notice in lieu of return, and no more than one determination need be made. If, at the election of the payor bank, a subsequent balance determination is made for the purpose of reevaluating the bank's decision to dishonor the item, the account balance at that time is determinative of whether a dishonor for insufficiency of available funds is wrongful.


55

Wrongful Dishonor of a Check


56

Do honor and dishonor checks

rightfully.

Do not wrongfully return a check.


57

How can we wrongfully dishonor a

check?

Maybe you placed a stop payment incorrectly.

Your financial institution paid a $7500.00 over a

stop pay. Then you bounced three checks. This

is both wrongful honor and wrongful dishonor

of a check.

Wrongful dishonor however may cause you to

pay damages to your account holder.


58

Do we have to pay a substitute check

across the counter?

Yes, it is the legal equal of a check.


59

Can we stop payment on a cashier’s

check?

In most states, there is a 90 day affidavit of loss

time frame and then the check may be reissued.

Refusing to pay your own cashier’s check is

wrongful dishonor of a check.


60

Signature Card Issues


61

Do remember the connection to

the account card and agreement.

Do not give money or take checks for

deposit for folks who are not on the

account.


62

1OWNERSHIP

2TITLE

3FEDERAL REGULATIONS

5TAXPAYER IDENTIFICATION

NUMBER

4SIGNATURES (Access)

Most signature cards have five basic components:

62Gettechnical Inc

63

Ownership

___ Single Party or

individual

___ Joint or

Multi-Party

___ Trust

___ _____________

Title

Signatures

Must Match

Must Match

Why do signature cards have to be consistent? Ownership matches

titling matches signatories keeps us from having legal and insurance

issues.

63Gettechnical Inc

64

�� POD/ �� Trust

Name of Beneficiaries______________________________

________________________

Number of Signatures

Required

�� 1 �� 2

�Agents or

Authorized Signers or

convenience

Some signature cards allow

signers (as permitted by card)

on individual or joint

accounts.

Some signature cards allow 2

signature requirement.

POD pay at death to the list of

beneficiaries.

Special Feature #1

Special Feature #2

Special Feature #3

Is POD a type of ownership or is it a special feature? It depends on your card and

state law. Sometimes it is in the ownership section and sometimes it is a special

feature. There are other special features.

64Gettechnical Inc

65

1

OWNERSHIP� Single Party

2

TITLE

Johnnie Smith

3

FEDERAL REGULATIONS

5

TAXPAYER IDENTIFICATION

NUMBER

4

SIGNATURES (Access)

Sally Smith

John Smith

Johnnie Smith

account holder wants to put in grandson’s name

but signed by everyone? No this is not a single party

account.

Gettechnical Inc65

66

1

OWNERSHIP� Single Party

2

TITLE

Jane Smith

3

FEDERAL REGULATIONS

5


NUMBER

4

SIGNATURES (Access)

Jane Smith

Sample: Single Party/Individual

Gettechnical Inc66

Single party is

checked, one owner

on title and one

signer.

67

1

OWNERSHIP

� Multiple Party

2

TITLE

Joe Smith or Mary Smith

3

FEDERAL REGULATIONS

5


NUMBER

4

SIGNATURES (Access)

Joe Smith

What happens if the husband opens

and the wife never signs? She is not insured

and she has no access.

Gettechnical Inc67

68

1

OWNERSHIP

� Multiple Party

�WROS

�WOROS

2

TITLE

Betty Smith or 29 Grandchildren and

any to come

3

FEDERAL REGULATIONS

5


NUMBER

4

SIGNATURES (Access)

Betty Smith

A grandma wants to put

grandchildren on the title, can we?

Gettechnical Inc68

NOOOOOO….

69

1

OWNERSHIP

� Multiple Party

�WROS

�WOROS

2

TITLE


3

FEDERAL REGULATIONS

5


NUMBER

4

SIGNATURES (Access)

Joe Smith

Mary Smith

Sample: Multi-Party/Joint Account

Gettechnical Inc69

Joint ownership, two in

title and two signers

70

1

OWNERSHIP

�Trust/POD

Beneficiaries

1. Bill 3. Stan

2. Betty 4. Karla

2

TITLE

Joe Smith or Mary Smith POD

3

FEDERAL REGULATIONS

5


NUMBER

4

SIGNATURES (Access)

Joe Smith

Mary Smith

Sample: Informal Trust Account

Gettechnical Inc70

Intention to leave at death in

ownership box, two owners and

named beneficiaries and

signatures to match

71

1

OWNERSHIP

� Multiple Party

�WROS

�WOROS

2

TITLE

Joe Smith or Mary Smith or The Mary

and Joe Smith Living Trust

3

FEDERAL REGULATIONS

5


NUMBER

4

SIGNATURES (Access)

Joe Smith

Mary Smith

Joe Smith, Trustee

Mary Smith, Trustee

Can we have an account with a trust and

people?

Gettechnical Inc71

72

1OWNERSHIP

� Multiple Party

�WROS

�WOROS

2

TITLE


3

FEDERAL REGULATIONS

5


NUMBER

4

SIGNATURES (Access)

Joe Smith

Mary Smith

Sample: Multi-Party/Joint Account

Gettechnical Inc72

73

1

OWNERSHIP

� UTMA

2

TITLE

Little Johnnie Smith a minor by Sally

Smith Custodian under UTMA

3

FEDERAL REGULATIONS

5


NUMBER

4

SIGNATURES (Access)

Sally Smith, Custodian

Agent/Authorized Signer: Bill Smith

Can an UTMA have an authorized signer? NO

Gettechnical Inc73

74

1

OWNERSHIP� Joint

2

TITLE

Johnny Smith a minor by Sally Smith

Custodian under UTMA

3

FEDERAL REGULATIONS

5


NUMBER

4

SIGNATURES (Access)

Sally Smith

Johnny Smith

Can a UTMA have a joint owner? No

Gettechnical Inc74

75

1

OWNERSHIP

� UTMA

� POD

2

TITLE

Little Johnnie Smith, a minor by

Sally Smith, Custodian under

UTMA POD

3

FEDERAL REGULATIONS

5


NUMBER

4

SIGNATURES (Access)


Can a UTMA have POD? No

Gettechnical Inc75

76

Can mom’s check go into child’s

UTMA account?

It happens. The mom endorses the check over

to the minor.

It would be better to have the mom deposit the

check into her own account and write the child a

check.


77

1

OWNERSHIP

� UTMA

2

TITLE

Little Johnnie Smith, a minor by Sally

Smith, Custodian under UTMA

3

FEDERAL REGULATIONS

5


NUMBER

4

SIGNATURES (Access)


Sample: UTMA Account—some states have joint

custodians.

Gettechnical Inc77

78

1

OWNERSHIP

� Multiple Party

2

TITLE

Little Johnnie Smith or Joe Smith

3

FEDERAL REGULATIONS

5


NUMBER

4

SIGNATURES (Access)

Joe Smith

Little Johnnie Smith

Sample: Multiple Party/Joint Account

with Minors

Gettechnical Inc78

79

1

OWNERSHIP

� Multiple Party

2

TITLE

John Smith or Sally Smith

3

FEDERAL REGULATIONS

5


NUMBER

4

SIGNATURES (Access)

John Smith

Sample: CD with Signature Card not signed by all

owners

Gettechnical Inc79

In this situation, the daughter (Sally) came in and said

they lost the CD. She filed an affidavit only signed

by her and got the $39,000. The father sued the

financial institution and won the money back. She

was not a signer.

80

Withdrawal Rights Questions


81

If a minor is in the title of the joint

account but has not signed signature card,

can he or she withdraw money?

Only those who sign can withdraw money or get

information on the account.


82

Can a spouse get information or

withdraw money on an account he or

she did not sign on?

Absolutely not. Only the signers on the account

can get information or funds out of the account.


83

Who can we give information to when

the only owner and signer dies?

We can give information or funds to the person

authorized by the court to act for the decedent.


84

Authorized Signers, Agents and

Convenience Signers

84

85

What can an agent/authorized

signer/convenience signer do?

-Created on the signature card contract

-Usually can make “transactions” for the owner

-Only typically sign on that one account

-Cannot change ownership or do anything to

benefit his or herself such as cashing a check

made payable to authorized signer

-In some cards, only allow one and only on

individual accounts


86

Continued..

-Some cards, allow for joint accounts and signers and sometimes for more than one agent or signer

-Cease at the death of owner or owners

-Usually appear in system as a memo and usually do not appear on the face of the checks of the owner

-May have the language of durable versus not durable

-Owner revokes by signing a new contract and removing the signer.

-Some states have laws which you have to follow and some do not. These laws should be reflected in your signature card agreement.

86

87

State law example #1

___ (6) CONVENIENCE ACCOUNT. The parties to the account own the account. One or more conveniencesigners to the account may make account transactions for a party. A convenience signer does not own the account. On the death of the last surviving party, ownership of the account passes as a part of the last surviving party's estate under the last surviving party's will or by intestacy. The financial institution may pay funds in the account to a convenience signer before the financial institution receives notice of the death of the last surviving party. The payment to a convenience signer does not affect the parties' ownership of the account.

Enter the names of the parties:

87

88

State law example #2

5-24-5 Designation of agent.

(a) By a signed writing, a party may designate one or more persons other than a party as his or her agent on an account. Unless the terms of the agency designation provide otherwise, the agency designation may be revoked or amended only by the party making the designation or by a guardian, conservator, or other fiduciary appointed by a court of the party's domicile and charged with the management of the account.

(b) Unless the terms of an agency designation provide otherwise, the agent's authority survives disability, incompetency, and incapacity of the party making the agency designation. The agent may act for a disabled, incompetent, or incapacitated party until the authority of the agent is revoked.

(c) Death of the party making the agency designation terminates the authority of an agent.

88

89

1

OWNERSHIP� Individual

�Joint

� Trust/POD

2

TITLE

Grandma

3

FEDERAL REGULATIONS

5


NUMBER

4

SIGNATURES (Access)

Grandma’s Signature

Granddaughter’s Signature as Agent or Authorized Signer

Grandson’s Signature as Agent or Authorized Signer

Can we have two authorized signers on an account? It depends

what your signature card contract says. Some can and some can’t.

89

90

1

OWNERSHIP� Individual

�Joint

�Trust/POD

�Convenience

2

TITLE

Grandma

3

FEDERAL REGULATIONS

5


NUMBER

4

SIGNATURES (Access)

Grandma’s Signature

Grandson’s Signature Convenience

What is a convenience signer? Very similar to an authorized signer

but usually is a type of ownership on the card.

90

X

91

Outside POA


92

Do respect the attorney-in-fact

relationship but…

Do not let attorney-in-fact benefit

him or herself.


93

What is a POA?

-Document usually drawn up by account holder’s attorney

-State law may dictate the form of the document

-These come in all shapes and sizes

-The documents may be complex and should be reviewed by financial institution’s legal counsel.

-May be durable or nondurable depending on state law

-Will dictate what the attorney-in-fact may or may not do

93

94

Can an attorney-in-fact withdraw money,

cash a check or change ownership to

benefit himself or herself?

Attorney-in-fact can only do what the POA says

he or she can. This typically involves acting for

the grantor of the power and not on behalf of

him or herself.


95

Does the attorney-in-fact have to sign an

affidavit? The rules for POAs are different in

many states but you might see something like

this…

Affidavit of Lack of Knowledge or Termination of Power, Recording, Good-Faith Reliance

As to acts undertaken in good-faith reliance on the durable power of attorney, an affidavit executed by the attorney in fact or agent under a durable power of attorney stating that the attorney in fact or agent did not have at the time of exercise of the power actual knowledge of the termination of the power by revocation, by the principal’s death, by the principal’s divorce or the annulment of the marriage of the principal if the attorney in fact or agent was the principal’s spouse, or by the qualification of a guardian of the estate of the principal is conclusive proof as between the attorney in fact or agent and a person other than the principal or the principal’s personal representative dealing with the attorney in fact or agent of the nonrevocation or nontermination of the power at that time.

95

96

Sample affidavit..

STATE OF TEXAS

COUNTY OF BRAZORIA

AFFIDAVIT

BEFORE ME, the undersigned authority on this day personally appeared _______________, known to me to be a credible person and upon oath states as follows:

"I am the duly appointed Attorney-In-Fact for _____________________, principal, who has executed according to law a Durable Power of Attorney naming affiant herein as his or her duly authorized agent to give authority to me to, among other things open an account at ABC Financial Institution in the name of or on behalf of said principal.

Affiant further states that on the _____ day of ________, 200_ as follows

Check and initial as applicable:

______ ( ) Said power of attorney had not been terminated or revoked by the principal, or by death or by the appointment of a guardian of the estate of the principal.

______ ( ) The principal in said power of attorney is disabled or incapacitated, as defined by said power.

Further your Affiant Saith Not.

Signed this __________ day of ____________, 200__.

___________________________________________

SUBSCRIBED AND SWORN TO BEFORE ME, by_____________________________ on this the _________ day of ________, 200__.

____________________________________________

Notary Public, State of Texas

THE STATE OF TEXAS

COUNTY OF BRAZORIA

This instrument was acknowledged before me on the _______ day of __________, 200__, by

_____________________________________________

Notary Public, State of Texas

96

97

In Illinois #2, you may have to accept

an Agent.AGENT'S CERTIFICATION AND ACCEPTANCE OF AUTHORITY

I, .......... (insert name of agent), certify that the attached is a true copy of a power of attorney naming the undersigned as agent or successor agent for ............. (insert name of principal).

I certify that to the best of my knowledge the principal had the capacity to execute the power of attorney, is alive, and has not revoked the power of attorney; that my powers as agent have not been altered or terminated; and that the power of attorney remains in full force and effect.

I accept appointment as agent under this power of attorney.This certification and acceptance is made under penalty of perjury.*Dated: ............

.......................

(Agent's Signature)

.......................

(Print Agent's Name)

.......................

(Agent's Address)

*(NOTE: Perjury is defined in Section 32-2 of the Criminal Code of 1961, and is a Class 3 felony.)

97

98

#2 Continued

(c) Any person dealing with an agent named in a copy of a document purporting to establish an agency may presume, in the absence of actual knowledge to the contrary, that the document purporting to establish the agency was validly executed, that the agency was validly established, that the named principal was competent at the time of execution, and that, at the time of reliance, the named principal is alive, the agency was validly established and has not terminated or been amended, the relevant powers of the named agent were properly and validly granted and have not terminated or been amended, and the acts of the named agent conform to the standards of this Act. No person relying on a copy of a document purporting to establish an agency shall be required to see to the application of any property delivered to or controlled by the named agent or to question the authority of the named agent.

(d) Each person to whom a direction by the named agent in accordance with the terms of the copy of the document purporting to establish an agency is communicated shall comply with that direction, and any person who fails to comply arbitrarily or without reasonable cause shall be subject to civil liability for any damages resulting from noncompliance. A health care provider who complies with Section 4-7 shall not be deemed to have acted arbitrarily or without reasonable cause.(Source: P.A. 96-1195, eff. 7-1-11.)

98

99

State law issue #3 from Georgia

ACCEPTANCE OF APPOINTMENT

I, (print name), have read the foregoing Power of Attorney and am the person identified therein as Agent for(name of grantor of power of attorney), the Principal named therein. I hereby acknowledge the following:

I owe a duty of loyalty and good faith to the Principal, and must use the powers granted to me only for the benefit of the Principal. I must keep the Principal's funds and other assets separate and apart from my funds and other assets and titled in the name of the Principal. I must not transfer title to any of the Principal's funds or other assets into my name alone. My name must notbe added to the title of any funds or other assets of the Principal, unless I am specifically designated as Agent for the Principal inthe title. I must protect, conserve, and exercise prudence and caution in my dealings with the Principal's funds and other assets.

I must keep a full and accurate record of my acts, receipts, and disbursements on behalf of the Principal, and be ready to account to the Principal for such acts, receipts, and disbursements at all times. I must provide an annual accounting to the Principal ofmy acts, receipts, and disbursements, and must furnish an accounting of such acts, receipts, and disbursements to the personal

representative of the Principal's estate within 90 days after the date of death of the Principal.

I have read the Compensation of Agent paragraph in the Power of Attorneyand agree to abide by it.

I acknowledge my authority to act on behalf of the Principal ceases atthe death of the Principal.

I hereby accept the foregoing appointment as Agent for the Principal withfull knowledge of the responsibilities imposed on me, and I will faithfullycarry out my duties to the best of my ability.

Dated: , .

99

In GA, you have to

accept the designation.

100

You will have to address state law

issues..

Pull your statute and talk to your legal counsel

Add any issues that the two of you see to your

checklist for accepting Power of Attorneys

100

101

When do POAs cease?

State law and document often dictate how these work.

Typically they cease at:

Death of grantor

Appointment of a guardian—will usually rule over rule a power of attorney

Revocation

Time (military power of attorney’s)

In community property states, divorce if between husband and wife

101

102

How should attorney-in-fact sign? Is

this the same for other fiduciary

relationships?• The attorney in fact is acting for

someone

• This is usually the owner of the account

Who is he or she acting on behalf of?

• We need the attorney-in-fact’s nameWho ?

• We need the job title

• Power of Attorney

• Attorney-In-Fact

What is the capacity?

102

103

Sally Smith has given a POA to her sister Hannah Smith. How should

Hannah indorse the check?

I

X Sally Smith

By Hannah Smith, Attorney-In-Fact

DO NOT SIGN/WRITE/STAMP BELOW THIS LINE

FOR FINANCIAL INSTITUTION USAGE ONLY

FEDERAL RESERVE B AND REGULATION CC

SAMPLE CHECK #1

Sally Smith 10.00

March 31, XXXX

Ten & ----------------------------------------------0/100

Bill Smith

103

104

Set off or offset


105

If we close an account of an account holder who owes

us money, then that former account holder comes in

to cash a check drawn on our financial institution can

we take the money?

Bank's check-cashing 'offset' practices yield UDAP penaltyOne of the July Civil Money Penalty orders reported by the FDIC imposed a $100,000 CMP on a Kentucky bank for violating the UDAP prohibition in section 5 of the FTC Act, citing a practice of collecting alleged debts from non-deposit holding customers attempting to cash checks with the bank, by confiscating check proceeds without the consumer's consent and without legal process. [Editor's note: Such practices typically result from a misunderstanding of the legal concept of "offset" or "setoff."] The Order also cited the bank's failure to abide by its Regulation E disclosures and regulatory standards as unfair and deceptive under Section 5.

Source BOL Newsletter


106

Can we offset a account holder’s debt

with an IRA, HSA or CESA?

No, it should be spelled out in your account

agreement that these cannot be “offset”.


107

10 Do’s to save you money


108

Thumb…

1. The front of check should match back of check should match the account.

2. If your account holder has not signed signature card, he or she cannot get money or information.

3. Business checks should be deposited in full and not given “cash back”.

4. Checks made payable to the financial institution should not be cashed.


109

Thumb continued…

5. Authorized signers, attorney-in-fact and convenience signers are not owners and should not be able to cash their own checks, ACH pay into account, change ownership. They can only transact on behalf of owner.

6. Your signature card governs.

7. Deposit contracts have to be signed. Deposit records are used to determine insurance on accounts.

8. Fiduciaries should not act to benefit themselves and cannot pass down their duty.


110

Thumb…

9. Deceased account holders cannot sign or

negotiate checks.

10. account holders should endorse checks and

complete deposit slips.


111


Thanks for participating!

Debbie Crawford

Gettechnical Inc

[email protected]

www.gettechnicalinc.com

Documents

Check Handling Do s and Don ts...Your State Association Presents Check Handling Do’s and Don’ts Program Materials Use this document to follow along with the webinar presentation