Banks charging dead people fees
The Royal Commission findings
The recent Banking Royal Commission has made it clear that it’s important to be aware of what happens to one’s bank accounts after they pass away.
The Royal Commission has discovered, among other things that Commonwealth Bank has been charging fees to clients who have died. In one instance, a man who had been dead for over 10 years was still being charged $65 per month for service fees.
This is clearly morally wrong, but is it against the law? Read this article to find out what you need to be aware of.
The role of the Executor
When a person who passes away has a will, the Executor of the will is required to complete a number of important tasks after the court has provided them a grant of probate. These include, (but are not limited to) selling assets, closing bank accounts, paying debts of the deceased, notifying beneficiaries of the death and completing tax returns for the deceased.
This process in a complex estate can take up to a year to complete. Once all the required administration is done, the funds from the deceased’s bank accounts can be distributed in accordance with their will. This can be done by the Executor with a copy of the death certificate and a copy of the grant of probate.
Can there be delays?
If someone’s estate is very complicated, or if they have a testamentary trust whereby funds are distributed to beneficiaries over a long period of time, the administration process may take longer than 12 months to complete. Things that can make a will complicated, include, if there are very specific requests outlined or if there are lots of specific gifts, if the person owns a business, if they had a previous spouse, if the will has been poorly prepared, if there are questions of the deceased’s mental capacity to make a will or if family members contest the distribution of the estate.
A testamentary trust is simply a trust that is contained in a will. If the trust provides that a particular beneficiary, or beneficiaries, are to receive X amount of dollars per month for 5 years, for example, then that will mean the estate takes longer to wind up than if all monies were to be distributed at once.
What does the law say?
At this stage, the banks have not been charged with anything. They have, however, arguably engaged in numerous unlawful acts such as unconscionable conduct, misleading and deceptive conduct and breaching fiduciary duties.
The law recognises categories of fiduciary relationships, such as solicitor and client, trustee and beneficiary and director and company. These relationships are such that one party places trust in the other to act in their best interests. For example, when you see a lawyer you place trust in them to act in your best interests at all times. Although banks and their clients are not a recognised category of fiduciary relationships in Australia, the nature of their interaction can potentially make it fiduciary in certain circumstances.
Assuming that the relationship is fiduciary, the banks are expected by law to follow two rules:
- the ‘no conflicts’ rule; and
- the ‘no profits’ rule.
In essence, these rules mean that the dominant party of the fiduciary relationship (ie. the solicitor, the trustee or the bank) must ensure they put the interests of the other party first in all circumstances and avoid any potential conflicts of interest. Moreover, they must not misuse their position of power and trust for personal gain or benefit.
Who’s in the wrong?
The Royal Commission causes us to ask the question: Why did no one notice money was being taken from these accounts and who is ultimately responsible?
The Executor of an estate should be keeping an eye on the accounts to ensure nothing is being taken out of them that shouldn’t be, i.e. fees for advice that was never given. The Executor also needs to make sure they notify the bank when a person has died. After they receive the grant of probate, the executor should take steps to close the deceased’s bank accounts and open accounts in the name of the estate.
Being the Executor of an estate is a big responsibility that should be taken very seriously. Unfortunately, as shown by the Royal Commission, many people either don’t know how to be an effective Executor or don’t pay enough attention to the details.
I’m the Executor of a will – what should I do?
If you’ve been appointed as the Executor of a will, it is crucial that you have a good understanding of what is required of you and what you should be looking out for. Likewise, if you’re making a will you should put careful thought and consideration into who you appoint as your Executor.
If you fit into either of these categories, it is a good idea to seek legal assistance so that you know what your roles and responsibilities are. At Lynn & Brown Lawyers, we have lawyers who specialise in wills and deceased estates who can provide you with expert legal advice.
About the authors:
This article has been co-authored by Chelsea McNeill and Steven Brown at Lynn & Brown Lawyers. Chelsea is in her third year of studying Law at Murdoch University. Steven is a Perth lawyer and director, and has over 20 years’ experience in legal practice and practices in commercial law, dispute resolution and estate planning.