The Banker/Customer Relationship II

Question 1

What happens when a customer dies and there is a valid will?

Answer 1

• Signed by testator
• Witnessed by two people
• Executors (executors nominate in Scotland) carry out the terms of the will, to distribute the estate in accordance with the testator’s wishes

Question 2

What happens when a customer dies and there is no valid will?

Answer 2

• Adminstrators deal with the estate
• Adminstrators (executors dative in Scotland) are appointed by the Probate Registry (by decree of the Shreiff Court in Scotland)

Question 3

What is the banker’s position when an account is in credit at date of death of a customer?

Answer 3

1. Cheques presented should be returned ‘Drawer Deceased’ and all transactions on the account should be stopped
2. The solicitors who are acting for the personal representatives should be told the position of the account and given a list of any documents or securities held on behalf of the deceased
3. Details of probate (a legal document & process validating a will and assigning an executor) or letters of adminstration should be recorded when presented to the bank
4. Funds and securities can now be released to the personal representatives

Question 4

What is the banker’s position when an account is overdrawn at date of death of a customer?

Answer 4

1. Cheques presented should be returned ‘Drawer Deceased’ and all transactions on the account should be stopped
2. A claim for the amount, plus interest, should be made to the solicitors acting in the winding up of the estate
3. If a life policy has been assigned as security to the bank by the deceased, the bank will obtain a Death Certificate and arrange for collection of the proceeds. If there is a surplus after this is done, it should be held on deposit in the executor(s) (or adminstrator’s) name unti presentation of the probate or letters of administration

Question 5

What is the law of succession?

Answer 5

• Laid down in England and Wales by Administration of Estate Act 1925
• Can be Intestate succession or Testate succession
• In Scotland there are prior and legal rights in the law of succession.
  
  • Prior rights are granted to surviving spouses where there is no will
  • Legal rights apply to testate and intestate succession and cover the division of the deceased’s estate among the surviving spouse and children

Question 6

What is a trust?

Answer 6

A trust is an arrangement under which property is vested in one person for the benefit of another.

Question 7

Who are the three parties to a trust?

Answer 7

• The testator (truster/settlor in Scotland) is the original owner of the property which is conveyed to the trustee to be held for the benefit of the beneficiary
• The trustee is the nominal owner of the trust property but is bound to administer it in accordance with the testator’s directions
• The beneficary is the person for whose benefit the trust exists

Question 8

What types of trust are there?

Answer 8

• Inter vivos trust: set up while the testator is still alive
• Mortis causa trust: operates only on testator’s death e.g. a donation made by the testator at the time of death to the beneficiaries in the trust
• Private trust: where the beneficiaries are private individuals
• Public trust: where the beneficiaries are members of the public e.g. the trust sets up benefits to identifiable religious, educational, charitable or other public organisations or causes

Question 9

What type of law do trusts partly consist of?

Answer 9

Common law of contract

Question 10

Under common law of contract, what are the powers of trustees?

Answer 10

1. To sell the trust estate or part of it (also grant feus and leases or heritable property in Scotland)
2. To borrow money on the security of real or personal property
3. To purchase property for use as a residence for a beneficiary
4. To appoint agents and solicitors and to pay suitable remuneration but noly if required by the type of business required
5. To grant all deeds necessary to effect their powers

Question 11

Under common law of contract what are the duties of trustees?

Answer 11

1. To gather and distribute the estate
2. To exercise due care
3. Not to delegate
4. Not to be one who acts for own personal benefit
5. to keep accounts
6. To keep the funds properly invested (in a continuing trust)

Question 12

What type of electronic funds transfers are there?

Answer 12

• Bankers Automated Clearing Services (BACS): used for the payment of salaries, standing orders, direct debits and payments from businesses to their suppliers
• Electronic Funds Transfer at the Point of Sale (EFTPOS): used in the retail trade
• Clearing House Automated Payment System (CHAPS): used for sending same-day value sterling payments from one member bank to another
• Faster Payments
• Society for Worldwide Interbank Financial Telecommunication (SWIFT): used for carrying out cross-border electronic transfers

Question 13

How is a banker’s duty of care to customers split when honouring debits made to the account electronically?

Answer 13

The duty of care is applied equally when honouring debts