Would some of you please share with me what your procedure is for removing a name from a joint account at the request of one of the account holders. It has always been my understanding that if a name is to be removed from a joint account, the account has to be closed and a new account opened. My supervisor wants to know why. She states this bank has always removed the name and left the account open. This makes me very nervous. So, if you all could share with me, I would be very appreciative.

I don't know of any law that supports opening a new account when a name is removed from an account, but that policy/procedure reduces possible confusion and risk.

Examples: What if a check comes in signed by the person that was removed? Are there checks with both names that would result in confusion? Does the signature card specifically grant the right that any signer can remove another signers' name?

There is no law or regulation regarding the removal of a name and whether the account should be closed or remain open. Common practice is to close the account. Especially checking accounts. The other person may continue to have checks and if they write one, your system won't be able to stop it and then you will be liable. It's just a good practice.

I have always heard that you can remove a name, but that it is preferred to change the account in total.

If my wife and I divorce, I don't want her to have checks to my account, as an example. The liability would be on the bank to ensure none come through with her signature on it. What is someone is holding a stale dated check she wrote and it processes when I am now the sole owner? I think the bank would have liability.

On the other hand, when my mom died she was taken off the account. My dad didn't have to open a new one after 40+ years.

So I think there is a matter of mitigating risks, but I don't have cites either way.

We allow removal of an account holder.

A new signature card is prepared along with a document requesting the ownership change. The owner being removed from the account signs the ownership change form relinquishing all claims to the funds on deposit now or in the future. Account cards, if issued, are surrendered.
A remaining account holder also signs, agreeing to the change and agreeing to hold the Bank harmless for any outstanding checks, etc. prepared by the individual being removed.

We allow removal of a name with written, notorized authorization from the person having their name removed. If no authorization is avaliable then we close the account and open a new account.

It's govenend by the States.

In CA (CA Probate Code 5204). A change in Joint ownership has to be signed and in writting, from all parties on the account.

-Kevin

From a contractual standpoint, if there are three parties to the account/contract "him," "her" and "bank," then it takes the agreement of all three to change the contract. The CA statute referenced reinforces that concept.

In states that do not have such clear direction, agreement of all parties should still be required to remove a signatory. However, closing account A and opening account B in the name of the remaining signatory is what best protects the bank.

Most banks pay checks based on the MICR line, not the signature. If the former account signatory still has a check and writes it after being removed, the bank will pay it regardless of who signed it. Entering into an agreement to remove the person from the account, but failing to make certain that person doesn't sign additional checks, more or less closes the door on any argument the bank might have had that it exercised reasonable care in the payment of the item.

We have always closed the account and opened a new one, bascially for the reasons listed below. The only exceptions are death, when we get a death certificate, or if we get some other documentation such as a divorce decree spelling out who gets what account. We have (of course!) made exceptions, but the general policy is to close and reopen.

Opinions are mine and mine alone.

I went through an unpleasant divorce and have a restraining order on my ex-husband. I opened up my own account at the bank I was working at, but the bank that we had a shared account needed both of our signatures to take a name off the account and I also believe to close it. SO, that means I still have an open account out there with my ex-husband. No way am I closing it, he isn't allowed to be in the same city as me.

We had a problem w/this very thing: mom, dad and daughter were on a savings account. They all agreed daughter could be removed and signed a "Change of Ownership" form. Later, daughter found some of the pre-encoded withdrawal tickets and cleaned out the account. Granted, branch personnel dropped the ball on verification of account ownership, but it happened. So - unless a person is deceased or we have a valid and documented medical reason (alzheimer's, etc.), the account is to be closed and a new one opened.

At a large bank that I worked for before most of you were born, we had a form to remove a signature that had to be signed by both existing signatories. We had one customer, however, who would add his existing (read temporary) girlfriend to his account and would slip in this form for her to sign along with all the other needed documents to ADD her to the account. He would have this "remove" card from the start each and every time. Big pain for us--loads of fun for him (oh well - it was the 70's)

Nice to hear from a fellow "Boomer." Banking, compliance, and life in general were a hell of a lot simpler then, yes? Even with the sleezy customer now and then!

What about IRS reporting. If you change TIN owner on account mid-year, how do you report the 1099 information? Is the amount split between TIN owner #1 and TIN owner #2 when the account was changed or does TIN owner #2 have to claim the interest for the entire year on their 1099?

Would you please show me a sample of the authorization form you use? Thanks.

Anon,
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