Wednesday, July 24, 2024

June 2006 Legal Briefs

Amendments to Deposit Account P.O.D. Provisions

  1. Understanding the Customer’s Needs
  2. First-Choice/Second-Choice POD Authority
  3. Charity as POD Beneficiary
  4. Required Notice to Accountholders

New Provision for Safe Deposit Box “Access on Death”

Amendments to Deposit Account P.O.D. Provisions

House Bill 2626 has been signed into law, and makes several changes to Oklahoma’s “payable-on-death” (POD) statute (Section 901 of the Banking Code), effective November 1, 2006.  This bill was drafted by the OBA.

The new provisions allow an individual to name one or more second-in-line (contingent) beneficiaries who would receive the money in an account if there is only one first-in-line (primary) POD beneficiary on the account (such as a spouse), and that first-in-line beneficiary dies before the accountholder dies. Previously it has not been possible in Oklahoma to name two levels of POD beneficiaries.

Another change allows an individual to name an IRS-qualified charity (church, school, non-profit hospital, charitable foundation, etc.) as a POD beneficiary (either as a primary beneficiary, or as a contingent beneficiary).  In addition, the statute requires banks to notify customers on new POD accounts (after November 1) that distributions to POD beneficiaries must follow the provisions of 6 O.S. Section 901.   

A bank’s new-account forms will need some revisions in order to deal with the first two changes mentioned above, concerning more POD beneficiary choices.  (All existing POD provisions will continue to be effective, with no changes required for already-existing accounts; however, an accountholder who wishes to revise his existing POD beneficiaries will be allowed to do so, in light of the new provisions.)  The third change mentioned above imposes a notice requirement for all new accounts that will have POD beneficiaries.

I will discuss, first, some of the problems that these new provisions can solve.  The importance of these changes is in giving the customer a deposit account that is tailored more appropriately to the customer’s individual needs.

1. Understanding the Customer’s Needs

To do a good job of handling beneficiary provisions on deposit accounts, a new accounts officer needs to understand each of the available choices (the various joint tenancy and POD options), and what they can accomplish for the customer.  Certainly a bank cannot and should not do “estate planning” for the customer, but it’s helpful to be able to fully explain the options in response to a customer’s questions.  When the new accounts officer takes time to listen and to provide good and careful information, this assists a customer in selecting beneficiary provisions that are the best “fit” for his own circumstances and goals.   

Beneficiary provisions are definitely not a subject where “one size fits all.” Deciding who is going to get my money (such as it is) after my death is one of the most “personal” and individual decisions that I can make. For some people the best choice is obvious, and no big deal.  Other customers are “conflicted” in making this decision, and tend to drag their feet.  Perhaps they want more time to see how certain situations turn out.  But in almost all cases, a bank officer does the customer a favor by encouraging the customer to put some kind of reasonably-well-thought-out beneficiary provision on a deposit account—at least for the time being, until the customer can come up with something he likes better.
In a perfect world, a lot more people would execute wills or establish trusts to satisfy their estate-planning needs.  There’s no substitute for a good estate plan designed by a professional if a customer’s goals are complicated, or if a special problem needs to be addressed.   

The existing POD statute in Oklahoma, unfortunately, is a “blunt” instrument—very much a “one-size fits all” approach—and if that’s not what you want in a particular case, that’s still what you get.  It has been simple to explain and administer, because it allows for very few choices.  An increasing number of bank customers have expressed their frustration that the POD statute is too narrow to allow for beneficiary options that would best meet their needs.

What many accountholders have requested is to be able to name “two levels” of POD beneficiaries.  They can’t predict the future, so they want beneficiary provisions that will “flex” instead of being rigid.  They want provisions whereby “if X is alive, it goes to X; but if X is not alive, then it goes to A and B in equal shares.”  (Wills and trusts allow this; insurance policies allow this; and even IRA’s allow this; but POD accounts have not allowed this.)  The changes in H.B. 2626 will bring the “two-level” beneficiary approach to POD accounts–for the first time.

Because the existing POD statute allows only “first-in-line” beneficiaries (one level of beneficiaries),  there is no way under the existing statute to name a replacement (or “next-in-line”) beneficiary who can take the place of the original beneficiary if the original beneficiary dies before the accountholder.  As the law currently stands, an accountholder must wait to see whether the original POD beneficiary dies before the accountholder, and only then can a replacement beneficiary be named.  

For a variety of reasons (listed in more detail below), there are many cases where the original beneficiary dies before the accountholder, but a replacement beneficiary does not get named.  In this situation (based on the existing statute) the funds in the account would be paid to the estate of the deceased POD beneficiary, who died before the accountholder.  Although the accountholder might have preferred at the beginning to name a “second-choice” or “next-in-line” beneficiary who will get the money if the first beneficiary is dead, the current statute just does not allow this.   

The most frequent situation in which two levels of POD beneficiaries could be used very effectively is as follows: “POD to Spouse (if living); or if spouse is deceased, POD to (Child) and (Child) in equal shares.”  (Spouses are already allowed to have a joint tenancy account, with a POD provision to the named children, taking effect upon the death of the second joint tenant.  But there are situations where that approach doesn’t fit.  One example is a “sole proprietorship” account which has only one owner.  An accountholder logically would want to set up this type of account as POD to Spouse (if living), then to (Child) and (Child) in equal shares.

Another example is when a couple has a lot of money on deposit at the bank. If they have already used up their $200,000 of FDIC insurance coverage for joint accounts, they would next want to use POD insurance coverage, by putting $100,000 in the wife’s name, POD to the husband; and $100,000 in the husband’s name, POD to the wife.  Almost everyone who has accounts that are structured in this way would prefer to add a second layer of POD beneficiaries when that option becomes available: “POD to Spouse (if living); or if Spouse is deceased, POD to (Child) and (Child) in equal shares.”  

Depending on the accountholder’s relation to the named POD beneficiary, there are situations where paying the accountholder’s funds to a deceased POD beneficiary’s estate (as current law requires), even without second-in-line beneficiaries available, will be exactly what the accountholder wants.  But there are other cases where paying the accountholder’s funds to a deceased POD beneficiary’s estate will not meet the accountholder’s needs.

 For example, an accountholder might name his elderly sister as POD beneficiary so as to provide some financial support for her if she outlives him; but (at least where the sister has no spouse or children) the family obligation is removed if the sister dies first, and in that case the accountholder would prefer that the money instead go to someone else—not to the sister’s estate.

A variety of problems can result from the existing statute’s requirement that a deceased POD beneficiary’s share must go to that beneficiary’s estate.  Sometimes this POD outcome forces a probate proceeding with respect to the deceased beneficiary, where that beneficiary’s small assets otherwise would not have required a probate.  (It would avoid forcing the probate of an “estate” if the deceased beneficiary’s spouse or children were named as contingent beneficiaries.)

Where a deceased POD beneficiary had no will, payment of the accountholder’s funds to the POD beneficiary’s estate will require those funds later to be paid out of the deceased beneficiary’s estate in the manner required by statute—not in a manner chosen by either the beneficiary or the accountholder.  Without a will, a portion of the beneficiary’s estate will automatically go to the beneficiary’s spouse (if living) and the balance to the beneficiary’s children.  (Sometimes this is exactly what the accountholder would want, but sometimes not.)

Perhaps the accountholder would prefer to designate the beneficiary’s spouse, alone, as a second-in-line beneficiary, because the children are young; or the other way around, the accountholder might have preferred that all of the money would go directly to the deceased beneficiary’s children (as a second choice), with none to that person’s spouse.  (The existing statute does not have enough flexibility to permit these options.)  

It’s also possible that a deceased beneficiary’s estate could be insolvent, so that paying the accountholder’s funds to the beneficiary’s estate would only help that person’s creditors, not the beneficiary’s heirs; but naming the beneficiary’s spouse or children as “next-in-line” beneficiaries could wire around the creditors of that estate.  

Some of the examples given above are complicated, and not all of them occur very commonly, but they do illustrate why in certain situations an accountholder will be much better served by naming “second-in-line” beneficiaries, beginning November 1.  

You may ask, “Why can’t an accountholder just wait to change beneficiaries, if and when the primary POD beneficiary happens to die before the accountholder?”  In part it’s a “peace of mind” issue, so that the accountholder can know in advance that everything is already taken care of—no matter what happens.  Beyond that, in a variety of situations (which happen every day), an accountholder simply may not be able to name a replacement beneficiary after the primary POD beneficiary has died.

Sometimes the accountholder and the beneficiary are both in bad health.  If the accountholder becomes incapacitated before the POD beneficiary dies, there may be no one who can change the beneficiary designation on the account when the primary POD beneficiary dies. (Someone may hold a power of attorney on the account, but I strongly believe it’s a “breach of fiduciary duty” to use the POA to change or add beneficiaries.)

Sometimes a grieving accountholder—upset over the death of a spouse or other loved one–is too “blown away” emotionally to focus on naming a replacement after the primary beneficiary dies.  Other individuals have great difficulty facing their own mortality, and as the event approaches, they are “in denial,” becoming almost “paralyzed” in their financial matters—not dealing with “loose ends” at all.      

Some people naturally procrastinate. They never get around to naming a replacement beneficiary, telling themselves they will do it “tomorrow.”  

Occasionally an accountholder has too many bank accounts, at too many banks, and honestly but mistakenly believes that the POD provisions on all of his bank accounts have probably been updated correctly.  And older people may become increasingly forgetful about what things they need to do.    

For all of these reasons, the best time to get an accountholder to focus on putting appropriate POD provisions on his account is whenever you have him at the new accounts desk.  Beginning November 1, bank officers opening new accounts probably should ask whether an accountholder wants to name one or more “contingent” POD beneficiaries at the same time he is naming a “primary” POD beneficiary.  Also, whenever a customer comes into the bank to change an existing POD beneficiary, the new-accounts officer probably should ask the accountholder to consider naming one or more contingent beneficiaries at that same time, to take full advantage of the flexibility provided by the new provisions.   

Finally, I would caution that you should probably never put POD provisions on an account without first asking whether the accountholder has already done some professional estate planning (a will or trust).  

In some cases, POD provisions can be used to coordinate with the accountholder’s already-existing estate plan. For example, if the person has a trust, but has an account that is held outside the trust in his individual name, it can be good planning to make the account “POD to the trust,” or in some cases “POD to Spouse (if living); or if Spouse is deceased, POD to the trust.” Either way, if the money ultimately gets dumped into the trust, it then gets distributed to heirs exactly as the trust agreement already provides.  So this POD provision fits with, rather than undermining, the planning that has already been done.

The worst use of a POD provision occurs when the accountholder has already prepared a very good will, providing exactly how the person’s estate should be divided at death; but the accountholder then places a variety of POD provisions on his accounts (usually for FDIC insurance reasons), with the result that all of his funds are paid out under the POD provisions and do not pass through his estate. This sometimes can be a tragedy.  The money that was supposed to “flow through” the estate to pay off mortgages, pay funeral expenses and fund certain specific bequests does not become available to the estate; and quite frequently, the use of such POD provisions (where there was already a carefully prepared will) will radically change “who gets how much.”  Often the accountholder lacks understanding that placing POD provisions on accounts can override the entire estate plan that an attorney has carefully prepared.

Where there is an estate plan already in place, you could say, “Mrs. Jones, we want to get this right so that your wishes can be carried out fully.  Would you please talk with your attorney, and ask him (her) to give us written instructions on how to set up these POD provisions? We want to avoid undoing anything you have already set up; and then you can have peace of mind that everything has been handled correctly.”

Or, where appropriate, the bank officer can simply ask the accountholder for permission to contact the attorney directly to work out how any POD beneficiary provisions should be set up.

(Some accountholders will be relieved that the bank officer has offered to deal with the attorney directly, so that the accountholder—who may not really understand these issues well—won’t have to explain it and possibly “lose something in the translation”; but other accountholders are quite “secretive” about their heirs under a will or trust, and would much rather talk with their attorney themselves.  Still other accountholders will not be receptive to either approach–but all the bank officer can do is to try.)

2. First-Choice/Second-Choice POD Authority

Now I will discuss exactly what the amended statute allows and requires.

The specific terminology in the POD statute (Section 901 of the Banking Code) has been modified to refer to “primary” (first-in-line) POD beneficiaries and “contingent” (second-in-line) POD beneficiaries.  A new subsection 3 clarifies that all POD beneficiaries will be considered as “primary” beneficiaries, unless they are specifically designated as “contingent” beneficiaries. All currently outstanding deposit agreements and forms will remain effective; and where any document refers only to POD “beneficiaries,” they will automatically be considered “primary” beneficiaries.  

(The nature of the newly-created “contingent” beneficiary provisions is that “contingent” beneficiaries won’t get anything if the “primary” beneficiary is still alive at the accountholder’s death.)

The amended POD statute is still somewhat limited, because it allows contingent POD beneficiaries to be named on an account if there is one “primary” POD beneficiary (such as a spouse) and no more.  If the accountholder designates two or more primary beneficiaries who will get a share of the account immediately upon the death of the accountholder, it will not be possible to add any kind of “contingent” (second-in-line) beneficiary provisions.

Let’s say someone wants to put the following POD provision on his account: “POD to (Child) and (Child), if living; but if either of them is not living at my death, then that deceased beneficiary’s share instead shall be POD to that person’s children who are living.”

The example just given doesn’t work under the amended statute, for several reasons:  (1) In every situation, each POD beneficiary who inherits must receive a share exactly equal to the share that every other person receives; so it will not be possible to give half to X (50%); and the other half to Y’s two kids (25% each) if Y is deceased.  (2) When there are at least two “primary” beneficiaries (in this case, Child and Child), it will not be allowed to name any “contingent” beneficiaries at all.  (3) It will not be possible to make an account payable to someone’s “children” or “grandchildren” or “descendants” as the designated POD beneficiaries.  The bank can’t be expected to determine how many persons fit these categories, which ones are alive, or what their names are, so every POD beneficiary on an account (primary or contingent) must be designated by name or else does not qualify as a permitted POD beneficiary.

How are contingent beneficiaries to be added to an account?  New subsection 7 of Section 901 says, “If only one primary P.O.D. beneficiary [is] designated on a deposit account, the account owner may add the following, or words of similar meaning” either in the style of the account or in the account agreement:  “If the designated P.O.D. beneficiary is deceased, then payable on the death of the account owner to (Name of Beneficiary), (Name of Beneficiary), and (Name of Beneficiary), as contingent beneficiaries, in equal share.”

The following summary roughly describes how funds will be distributed from an account with one or more POD beneficiaries, depending on which of several possibilities may exist:

(a) If an account has one or more POD beneficiaries, and no mention is made of “contingent beneficiaries,” then upon the death of the last owner of the account, the funds will be divided into as many shares as there are named beneficiaries.  (This is what existing law already provides.) Each living named POD beneficiary gets one share, and the estate of any deceased named POD beneficiary gets one share.  Nothing gets paid to other individuals.

(b) If an account has only one named “primary” POD beneficiary (whether living or dead) and the account also provides for “contingent beneficiaries,” then (a) if that sole “primary” beneficiary is living at the death of the last account owner, the “contingent beneficiaries” will be ignored, and all of the money will go to the primary beneficiary; but (b) if that sole “primary” beneficiary is deceased at the death of the last owner of the account, then the money will not go to the “primary” beneficiary’s estate, but instead will go to the “contingent beneficiaries,” divided into as many equal shares as there are named “contingent beneficiaries”; and if any “contingent beneficiary” who would be entitled to one of these equal shares is deceased, that share shall instead go to the estate of the deceased contingent beneficiary.  (There is no way to set up a POD account to prevent a deceased contingent beneficiary’s share from going to the estate of the deceased contingent beneficiary.)

 Under the revised POD statute it still isn’t going to be possible to add any “contingent” beneficiaries to an account if at least two “primary” beneficiaries are named on the account.   

Based on the statute’s somewhat-expanded POD options, bank officers will need to be more careful in determining who is entitled to receive the funds after an accountholder’s death, if there is not only a named “primary” beneficiary but also one or more named “contingent” beneficiaries on the account.

3. Charity as POD Beneficiary

I have often been asked by bankers whether a customer can name a charity as a POD beneficiary.  Some of the examples I have been asked about include a depositor’s local church, the Baptist Foundation of Oklahoma, the American Red Cross, and the Oklahoma Medical Research Foundation.

There’s obviously nothing wrong with a person wanting to make a charitable gift after death.  People do this all the time in their wills.  The problem with trying to do this by a POD provision on a deposit account is that the statute simply has not allowed it.  Up until now, and continuing until November 1 (the effective date of the changes), every POD beneficiary must be either (1) an individual, or (2) a trust.  Beginning November 1, however, it will also be possible to select a third category of POD beneficiary, a “nonprofit organization” recognized by the IRS as a tax-deductible charity (a Section 501(c)(3) organization).  This category includes organizations formed for religious, charitable, educational or scientific purposes and having an official letter recognizing their Internal Revenue Code Section 501(c)(3) status.

Generally, you won’t need to be concerned about a church, a school, a college, a non-profit foundation, or any other kind of non-profit organization that you already know is qualified to accept tax-deductible charitable donations.  Where you must be careful is when the customer wants to name some organization as POD beneficiary that you’re not sure would be a tax-deductible charity. Something like the Garden Club, the local Little League team, the Rotary Club, etc., will be “non-profit” but will not be a tax-deductible charity, and so won’t be a permitted POD beneficiary, even after November 1.

You might ask, “What difference does it make whether the non-profit organization that the accountholder selects as a POD beneficiary is really ‘charitable’ or not?”  The problem is, if the named POD beneficiary is not within one of the categories permitted by statute, the bank probably isn’t legally able to pay that entity at the accountholder’s death. Two unfortunate scenarios could result: (1) the accountholder’s intended purpose may go unfulfilled, and/or (2) the bank may find itself in the middle of a lawsuit between the beneficiary that the statute doesn’t allow and the heirs or creditors that will get more money from the estate if the POD provision is declared “void.”

Bank employees setting up deposit accounts with POD provisions should be sure that a particular POD beneficiary is actually allowed by Section 901 of the Banking Code.  It’s fairest to the customer to tell him “up front” if the customer’s choice of POD beneficiary won’t work under the statute.  Then the customer can make other plans—such as preparing a trust agreement or a will to get the money to the intended recipient after death—or perhaps he can make a donation sooner, during lifetime.   

Banks should consider two other issues when they begin setting up charities as POD beneficiaries:  First, it will still be true that each POD beneficiary receiving money at death must receive an equal share of the deposit account. An accountholder will not be able to specify, for example, that $5,000 of an account will be POD to the church and the rest will be POD to an adult child. If the accountholder names only the church as POD beneficiary, the church will get it all.  If the accountholder names  both the church and an adult child as POD beneficiaries, then the only way the account can be distributed is half-and-half.  If the church and two individuals are named as POD beneficiaries, each must get one-third—and so on.

Second, a charitable non-profit organization will not be a “qualified beneficiary” for FDIC insurance purposes (even though it will soon be an available beneficiary under state law).  If, for example, a customer wants to put three POD beneficiaries on a deposit account so that it will be insured for up to $300,000 (based on up to $100,000 of coverage per beneficiary), each of the POD beneficiaries must stand in a “qualified beneficiary” relationship to the accountholder in order to achieve a fully-FDIC-insured outcome based on who the beneficiaries are.  

If, for example, one of the three beneficiaries on an account is a non-qualifying beneficiary (as defined by the FDIC), that beneficiary’s proportionate share of the total account balance (in the above example, one-third) cannot be FDIC-insured based on per-beneficiary coverage.  The non-qualifying beneficiary’s share of the POD account (for example, the one-third of a $300,000 account that would go to a church) could still be fully FDIC-insured by counting the non-qualifying “share” of the POD account against the accountholder’s individual FDIC insurance coverage limit of $100,000.  This approach works out fine as long as the accountholder does not have any other deposit account at the bank that relies on his individual insurance coverage.  However, if the individual has other accounts at the bank that already use up part or all of his individual insurance coverage, naming a charitable entity as POD beneficiary may cause part of the individual’s overall deposits to be uninsured.

But the accountholder who might like to name a charity as beneficiary typically does not have any close relatives, or else is at odds with whatever relatives there may be.  On this basis, the person already may have no one to name who would be a “qualified beneficiary” on a POD account, and is already limited to just $100,000 of individual insurance coverage.  In this situation, naming a charity as POD beneficiary doesn’t make the accountholder’s FDIC insurance issue any worse than it already is.   

Realistically, the customer who is most likely to name a charity as POD beneficiary (instead of preparing a will) is someone with deposit accounts that are well within the FDIC individual insurance limits.  The person may need to hang onto whatever money there is, until death—which is why the money isn’t given to a charity during lifetime.  But once the accountholder dies (having all debts paid and all financial matters in order), the person is happy to leave what remains to charity.

The scenario just described is probably the one where the new POD provision will be most useful.  This provision won’t be attractive to a lot of people, but it expands a customer’s permitted range of options, and it will fit some accountholders’ needs very well.

Note that the revised statutory language would allow a qualified charitable organization to be either a “primary” POD beneficiary or a “contingent” POD beneficiary.  But if the charity is named as a “primary beneficiary,” it would not make sense to name “contingent” beneficiaries on the account, because a charity is not an individual and cannot die. 

4.  Required Notice to Accountholders

In considering House Bill 2626, some of the legislators were concerned that accountholders may not understand that a named POD beneficiary’s share of the account could end up in a named beneficiary’s estate if that beneficiary dies before the accountholder.  

Usually, a bank cannot know what an accountholder assumes or expects in these circumstances, because new accounts officers often do not explain to the accountholder that money intended to be paid to a named POD beneficiary (if living) will often instead be paid to that POD beneficiary’s estate (if deceased).  

The existing POD statute definitely forces a deceased beneficiary’s share to be paid to that beneficiary’s estate in most circumstances, with no other choice available to the accountholder.  By allowing “contingent” beneficiaries, the amended POD statute provides a way to prevent payment to a deceased primary beneficiary’s estate if there is only one primary beneficiary and contingent beneficiaries have been named.  However, in some cases, the amended statute will still force a deceased primary or contingent beneficiary’s share to be paid to that beneficiary’s estate—with no choices on the accountholder’s part.

The Oklahoma Legislature imposed the following notice requirement on all new POD accounts that are created after November 1:  “Subsequent to [November 1, 2006], a bank shall provide a customer creating a P.O.D. account with a written notice that the distribution of the proceeds of in the P.O.D. account shall be consistent with the provisions of Section 901 of Title 6 of the Oklahoma Statutes.”  

This disclosure will inform customers that the POD provision they put on their account will follow in all respects the distribution requirements of Section 901.  With this, they will have a citation that they can look up for more details, if they know where to find the statutes.  But the revised POD statute has become more complicated, and harder to understand.  I am somewhat concerned that referring people to the statute, or even giving them a copy, will not actually provide much “user-friendly” information. It might be a good idea (and a courtesy to accountholders) to provide not only (a) the required notice that states where to locate the statute, but also (b) a plain-English summary of what the revised POD statute actually says.

I assume that the required notice to newly-established POD accounts will be given in a form that an accountholder can keep.  

Depending on the importance that a particular bank places on the various POD changes in Section 901, it may be desirable to put out a “statement stuffer” after November 1, notifying POD customers that they now have more options available in designating POD beneficiaries on their deposit accounts, and that they should ask a new accounts officer for details concerning how these revised provisions might be useful to them.   

The notice requirement that the statute imposes for new accounts with POD provisions can be included in this same statement stuffer—simply for information, not as a requirement. The statute apparently requires the notice only for someone who opens a POD account after November 1—or someone who first adds a POD provision to an existing account after that date.  Accountholders that make no changes to existing accounts after November 1 are probably not required to get a notice.

New Provision for Safe Deposit Box “Access on Death”

House Bill 2626 also contains a brand-new provision, effective November 1, 2006, allowing the lessee of a safe deposit box to name one or more persons who can access the box after the lessee’s death and withdraw the contents.   This provision will become Section 1301.2 of the Banking Code.

Of course, Section 1301.1 of the Banking Code already allows a “deputy” to be appointed, who can access the lessee’s safe deposit box until the death of the lessee.  Many customers find it illogical and frustrating (under existing law) that neither a deputy nor a person holding a power of attorney can remove the contents from a box after the lessee’s death.  

There are three existing circumstances in which an authorized individual can gain access to a box after a person’s death and remove the contents:

(1) the box is held in the name of a trust, and the successor trustee seeks access to the box;

(2) a personal representative of the lessee’s estate, appointed by court order, seeks access; or

(3) a surviving joint tenant on the box seeks access.

In each of the cases just listed (except when the surviving joint tenant on the box happens to be a spouse), the Oklahoma Tax Commission must be notified, and a waiting period must expire, before a person listed above can remove the contents of the box.

The situation that I am asked about most frequently, however, occurs when the deceased lessee has no joint tenant on the box, the deceased’s estate will not require a probate proceeding because of only minimal other assets that are owned, and the parties do not want to start a probate proceeding just so that a personal representative can be appointed who can access the box.   

The new “access on death” provision was drafted by the OBA to deal with the situation just described.

There are various ways that this “access on death” authority can be given.  It can be granted alone (with no “deputy” authority during lifetime); or the powers can be “stacked” so that someone has access to the box both before and after death (being both a “deputy” and someone with “access on death” authority).   It also will be possible for one or more persons to have “deputy” authority during the lessee’s lifetime, while a different person or persons (such as an attorney) would have “access on death.”  

This statute does create at least one possibility that didn’t exist before—allowing someone to gain access to the box only after the lessee’s death.  (A joint tenant, for example, would have access after an elderly lessee’s death, but also must be given access prior to death.)  Some lessees are stubborn, not wanting anyone to meddle in their affairs while they are alive; but they would be willing to give someone access after their death.

Specific Provisions

If a lessee grants “access on death” to one or more persons, and the various other requirements of the statute (outlined below) are met, the financial institution holding the box must give the person(s) access to the box after the lessee’s death.

Subsection B of Section 1301.2 requires the authorization to be in the following form; “I hereby authorize access to safe deposit box (number or other identification) at (name of financial institution) upon my death to (name of person).”   This form must be signed and dated by the lessee, and the lessee’s signature must be notarized.  (If there is more than one lessee on a box (joint tenants), all lessees must sign the authorization form; and it cannot be used until after the death of the last lessee.)

I can see a couple of ways that these authorizations might be obtained.  First, it could be something that the bank regularly offers to the customer as an option, when a safe deposit box is opened–or later.  It’s going to require a separate paragraph (apart from the body of the regular safe deposit box agreement), a date, a signature line, and a notary block.

Second, lawyers could start using a standard procedure of asking their clients to execute an “access on death” authorization whenever they are signing a set of estate planning documents (a will or trust, power of attorney, health care directive, etc.).  

The statute provides two ways that an “access on death” authorization can be revoked.  One method is by having the lessee sign and date the following language, which must be notarized:  “I hereby revoke the authorization for access to safe deposit box (number or other identification) at (name of financial institution) upon my death to (name of person).”  (Where there are joint lessees on a box, a revocation by either lessee would apparently be sufficient. I assume that such a revocation could also be made by power of attorney.)  The other method of revocation is “as a matter of law [automatically] if the lessee is divorced from the person to whom the authorization was granted,” unless the divorced lessee later authorizes that former spouse to have “access on death.”

The “access on death” authorization is not itself sufficient to allow access to a safe deposit box after the lessee’s death, because, in addition, after the death of the last lessee, the bank must obtain an affidavit from the person holding the “access on death” authorization. This affidavit must satisfy the requirements of subsection C of new Section 1301.2.  It must state:

(1) That the last surviving lessee of the safe deposit box has died;

(2) That the person swearing to the affidavit is the same person named in the “access on death” authorization, a copy of which must be attached to the affidavit;

(3) That the authorization has not been revoked; and

(4) That the person swearing to the affidavit believes that no estate proceeding will be commenced with respect to the estate of the lessee.

The fourth point (just mentioned) will effectively eliminate the use of an “access on death” authorization in any situation where an estate proceeding is likely to be held.  The authorization could (and perhaps should) be granted as a standard procedure in almost all cases–“just-in-case” it may later be needed.  If an estate proceeding actually will be held after the lessee’s death, the personal representative of the estate, when appointed by court order, will have full access to the box.  In this situation, there is no reason why a person with “access on death” authorization should be allowed to compete with the personal representative for access to the box.  Thus, the authorization granted in many individuals’ circumstances will not actually be used to access a box except in those situations when an estate proceeding will not be started.

As provided in subsection D of Section 1301.2, if a bank receives a proper affidavit as described above, and has complied with Oklahoma Tax Commission reporting requirements for the box (and waiting period), and all lessees of the box are deceased, the bank must grant access to the authorized person.

Subsection F discharges a bank from any criminal or civil liability for granting access, if it has complied with the statute’s requirements.  Subsection E provides that someone who knowingly submits a false affidavit shall be guilty of a misdemeanor and shall be liable in damages to any person who is harmed. A bank, however, will not be liable if it relies on an apparently appropriate affidavit.