Most agency relationship typically ends when one party dies or becomes incompetent. However, a special rule exists for banks and their obligations to pay and honor checks written by a customer who passed away or became incompetent. An executor of an estate might need to know this rule in order to carry out their executor duties with respect to handling the assets of the deceased.

What Is a Bank’s Obligation to Pay Checks upon Death or Incompetence of Its Customers?

Generally, a bank with the authority to pay for checks written by a customer will continue to have the authority to pay them. Once the bank learns about the death or incompetence of the customer, it has a reasonable time to act upon the news. This typically means notifying the appropriate internal departments.

In addition, a bank may pay for checks written before and on the date of death of the customer in the first 10 days following the date of death even if the bank knows of the death.

Is There a Way to Stop a Bank from Paying These Checks?

Yes. The bank’s authority to pay checks even after the death or incompetence of the customer may be revoked by any person claiming an interest in the account. For example, any of the following may be able to initiate a stop-payment proceeding:

The bank generally has no obligation to determine the validity of these stop-payment orders. However, the bank can still be liable for damages for failing to act with good faith or to exercise ordinary care.

May These Rules Be Changed between the Bank and Its Customers?

Yes. It might be possible for the bank and its customers to change these general rules by entering into a contract that alters these rules.

Do I Need an Attorney Experienced with Estate Administration?

The person appointed to administer the estate may have tax or legal questions that need to be answered by a lawyer. An estate lawyer will know what to do, and help guide you through the process.