Withdrawing Money For Funeral Expenses (Nonaccountholder)

Answer from MARY BETH GUARD:
I agree with Sam that the answer will depend upon state law. You may find, however, that you don't have a state statute which directly addresses the issue. In that instance, you may find it helpful to reason through the risks posed by allowing this type of withdrawal. Here's the analysis I would follow in our state, for example.

Who could sue you if you take this action? Who else might have a superior claim to the funds?

In my state (Oklahoma), there is no statute which provides direct authority for a financial institution to allow a withdrawal from a decedent's account for funeral expenses. Nevertheless, funeral expenses are one of the first items which are entitled to be paid in a probate of the deceased individual's estate. Funeral expenses and expenses of last illness come before the claims of creditors and before the claims of heirs, legatees and devisees. So, you look at the question, "Who could complain or successfully sue if money belonging to the decedent (that isn't in a joint tenancy account with right of survivorship or in an account held as a Totten trust or POD) is diverted to the payment of funeral expenses?" In most instances, the answer to your question is going to be that no one will have standing to successfully sue. Four caveats, however. 1) The statute might refer to payment of "reasonable funeral expense". If a griefstricken loved one has gone off the deep end and provided a King Tutlike burial to the tune of many thousands of dollars, creditors of the estate (and possibly legatees and/or heirs as well) could attack payment of such expenses. 2) If the expenses were already paid by a preneed fund, withdrawal of money from the account would not be proper. 3) If the account is owned in joint tenancy or a Totten trust or has a POD beneficiary, hands off! 4) Make sure you pay the person who has really incurred the expense.

1. Determine whether the expenses were "reasonable".

2. Make sure the funeral expenses weren't already covered by a preneed burial trust fund account (in which case there would be no need for reimbursement.)

3. If possible, debit the account and make a cashier's check payable directly to the funeral home, rather than to a relative/friend. If the bill has already been paid by family or friends, make sure you get a copy of it when you are debiting the account to reimburse them and make a quick call to the funeral home to make sure the bill really has been paid. (Just because someone has an invoice/statement for the expense doesn't mean they've paid it.

4. You might also want to consider obtaining a signed indemnification agreement from the person making the request. The indemnification agreement would bind them to cover any claims that arise against you by virtue of your allowing the requested withdrawal.

This is one of those situations where you may find that the business risk to taking the requested action is small enough to justify taking the action.

First published on BankersOnline.com 7/2/01