Deceased Member Issues

By David A. Wolfe, Attorney

On occasion, credit unions are faced with the death of an account holder or borrower and the resultant issues that arise. The grief process is always difficult for the family and disputes may arise involving inheritance rights as the estate is settled.  If the member has a will, the process is often much easier and faster, but the credit union’s member service-focused assistance must be balanced by its duty to protect against unauthorized account access and the integrity and privacy of its member’s financial information.  When contacted by family members, the credit union should take precaution not disclose any non-public information as the National Credit Union Administration’s (NCUA) privacy regulations generally preclude all federally insured credit unions from even disclosing the fact that any individual, including a deceased person, is or has been a member of the credit union.

Deceased Member is an Account Holder

In many situations, an aging or incapacitated member has provided a family member power of attorney over their finances or a conservator has been formally appointed, but it is important to remember that the powers of attorney or conservatorship cease to exist when the incapacitated person passes away.  Any funds held in the member’s account become part of the estate to be settled by the personal representative for the member’s estate, unless the account has a beneficiary already designated, e.g., POD accounts, IRAs, etc.  In order to access or transact business on a deceased member’s account, that person must file an application with the probate court and go through the process of being appointed personal representative.  Once appointed, the personal representative can provide the court-approved Letters of Authority to the credit union to verify their authority to transact on the account.

Loans Where the Deceased is a Borrower or Guarantor

Other issues arise related to loans held by credit unions where the deceased family member is a borrower or guarantor. In most instances, no other family members will take responsibility for the indebtedness and the credit union is often left to exercise its rights in collateral as continued collection upon a judgment, repossession of collateral or foreclosure of real property is permitted.  When dealing with an unsecured loan, the first concern when an account holder dies and the account is in default is that the credit union file its claim with the probate court.  For secured loans, the credit union may continue efforts to foreclose and/or repossess collateral.

The credit union should also seek to setoff funds held in accounts in which the deceased member held an interest upon his or her death if the credit union believes that the debts will not be paid by the heirs or the estate.

The death of a family member is a significant source of stress for all involved and the resulting estate issues can be exceedingly complicated.  In these situations, it is critically important to discuss these issues with your attorney to help protect your credit union and avoid any unnecessary liability.

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