Outstanding checks at date of death


J

Jim Saga

My mother died last week in Indiana. I am one of three
children.

For a number of years my mom has given each of her kids and
their spouses a $1,000 Christmas check each year. I never
cashed my checks for Dec 2001, Dec 2002 and Dec 2003 (I was
waiting for a "great investment opportunity" to come along.
Also, I would have cashed them sooner since my mother had
been very sick for a number of months but I couldn't find
them in my messy office and I didn't think she would die).

Well, I found the three checks yesterday while looking for
something else and called my mother's estate executor.

He said that the checks would normally be valid even though
one was written three years ago. But because the checks
represented a gift and were not cashed before my mother
died, that the checks were now void.

Is this really true in Indiana?
Do I have any legal recourse?

More information:

My mom had three trusts that will be split evenly among her
three children. She also had a checking account that was not
part of the trust. It had a balance of about $9,000 at the
time of her death. My mom added my sister to the account a
few years ago to pay bills when she was in the hospital (My
sister lives in the same town as my mother and my brother
and I live in other states.) Well, it turns out that the
account was a joint account with my sister with right of
survivorship rather than my sister just being added as a
check signer (I don't believe that this was my mother's
intent for my sister to get the full balance of the account
versus being part of her estate but it's okay with me since
my sister was always their to help my mom.)

But if it's true that the checks are no longer valid, I do
feel that the moral and correct thing to do is for my sister
to write me a check for $3000 for two reasons: One, if I had
cashed the checks 10 days ago the balance in the account
going to my sister would have been $6,000 rather than $9,000
and two, that's what my mom would want her to do.

Also, since the checking account is a joint account and my
sister is still alive, are not the checks still good even
though they represent gifts because one of the joint owners
is still alive?

Your advice is very much appreciated.

Jim
Dallas, TX
 
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S

Stuart Bronstein

Jim said:
My mother died last week in Indiana. I am one of three
children.

For a number of years my mom has given each of her kids and
their spouses a $1,000 Christmas check each year. I never
cashed my checks for Dec 2001, Dec 2002 and Dec 2003 (I was
waiting for a "great investment opportunity" to come along.
Also, I would have cashed them sooner since my mother had
been very sick for a number of months but I couldn't find
them in my messy office and I didn't think she would die).

Well, I found the three checks yesterday while looking for
something else and called my mother's estate executor.

He said that the checks would normally be valid even though
one was written three years ago. But because the checks
represented a gift and were not cashed before my mother
died, that the checks were now void.

Is this really true in Indiana?
This is really a legal question rather than a tax question.
But in general a bank is not required to cash a check for
someone who has died. You can submit them and the bank may
cash them, but don't hold your breath.
Do I have any legal recourse?
You can (and should) submit a creditor's claim in the
probate, if there is one. If not, submit it to the trustee
of her trust.
My mom had three trusts that will be split evenly among her
three children. She also had a checking account that was not
part of the trust. It had a balance of about $9,000 at the
time of her death. My mom added my sister to the account a
few years ago to pay bills when she was in the hospital (My
sister lives in the same town as my mother and my brother
and I live in other states.) Well, it turns out that the
account was a joint account with my sister with right of
survivorship rather than my sister just being added as a
check signer (I don't believe that this was my mother's
intent for my sister to get the full balance of the account
versus being part of her estate but it's okay with me since
my sister was always their to help my mom.)

But if it's true that the checks are no longer valid, I do
feel that the moral and correct thing to do is for my sister
to write me a check for $3000 for two reasons: One, if I had
cashed the checks 10 days ago the balance in the account
going to my sister would have been $6,000 rather than $9,000
and two, that's what my mom would want her to do.
Then ask her if she will agree to that.
Also, since the checking account is a joint account and my
sister is still alive, are not the checks still good even
though they represent gifts because one of the joint owners
is still alive?
I suspect the answer is yes, but I can't say for certain
without doing some research that would cost you some money.

Stu
 
H

Herb Smith

My mother died last week in Indiana. I am one of three
children.

For a number of years my mom has given each of her kids and
their spouses a $1,000 Christmas check each year. I never
cashed my checks for Dec 2001, Dec 2002 and Dec 2003 (I was
waiting for a "great investment opportunity" to come along.
Also, I would have cashed them sooner since my mother had
been very sick for a number of months but I couldn't find
them in my messy office and I didn't think she would die).

Well, I found the three checks yesterday while looking for
something else and called my mother's estate executor.

He said that the checks would normally be valid even though
one was written three years ago. But because the checks
represented a gift and were not cashed before my mother
died, that the checks were now void.

Is this really true in Indiana?
Do I have any legal recourse?

More information:

My mom had three trusts that will be split evenly among her
three children. She also had a checking account that was not
part of the trust. It had a balance of about $9,000 at the
time of her death. My mom added my sister to the account a
few years ago to pay bills when she was in the hospital (My
sister lives in the same town as my mother and my brother
and I live in other states.) Well, it turns out that the
account was a joint account with my sister with right of
survivorship rather than my sister just being added as a
check signer (I don't believe that this was my mother's
intent for my sister to get the full balance of the account
versus being part of her estate but it's okay with me since
my sister was always their to help my mom.)

But if it's true that the checks are no longer valid, I do
feel that the moral and correct thing to do is for my sister
to write me a check for $3000 for two reasons: One, if I had
cashed the checks 10 days ago the balance in the account
going to my sister would have been $6,000 rather than $9,000
and two, that's what my mom would want her to do.

Also, since the checking account is a joint account and my
sister is still alive, are not the checks still good even
though they represent gifts because one of the joint owners
is still alive?
Assuming the checking account is still open, submit the
checks for payment, by depositing in your account. Unless
the outstanding checks have been cancelled (unlikely in such
a short time) they will be honored. If that is the case,
then problem solved.
 
R

rick++

~Several google references say Indiana has passed the Universal Commercial Code
which allows banks not to honor checks more than six months old.
Individual banks are allowed laxer policies.
 
C

Christopher Green

My mother died last week in Indiana. I am one of three
children.

For a number of years my mom has given each of her kids and
their spouses a $1,000 Christmas check each year. I never
cashed my checks for Dec 2001, Dec 2002 and Dec 2003 (I was
waiting for a "great investment opportunity" to come along.
Also, I would have cashed them sooner since my mother had
been very sick for a number of months but I couldn't find
them in my messy office and I didn't think she would die).

Well, I found the three checks yesterday while looking for
something else and called my mother's estate executor.

He said that the checks would normally be valid even though
one was written three years ago. But because the checks
represented a gift and were not cashed before my mother
died, that the checks were now void.

Is this really true in Indiana?
Do I have any legal recourse?
This is really a law question, not a tax question; you are
likely to get better answers at misc.legal.moderated.

The tax consequence of a gift by a check that is uncashed at
the donor's death appears to be that the gift is not a
completed gift. The rationale for this is to prevent estate
tax evasion through a scheme of writing but not cashing a
series of checks for less than the annual gift tax
exclusion. See Estate of Newman [Est of Newman, 111 TC No 3
(1998)] for more on this.

It is possible, however, to conclude that delivery of a gift
check creates a gift that is completed for purposes other
than gift and estate tax and thus enforceable. Gifts are
generally completed when the subject matter of the gift
(here, money represented by the check) has passed out of the
donor's control. Just because the donor could try to revoke
the gift by stopping payment doesn't change that.

If the bank has been instructed not to honor checks on the
decedent's account, it should do so, and trying to cash the
checks will cause a mess with finger-pointing and
bounced-check fees. That doesn't, however, mean that the
gifts are no good.

Since you may be able to enforce the gifts, doing so would
put you in the position of being a creditor of the estate.
Since creditors are paid before heirs, this is not a bad
position. You'll have to weigh the value of standing on your
rights against the family hostility this is likely to cause,
though.
 
S

Stuart Bronstein

Christopher said:
(e-mail address removed) (Jim Saga) wrote:
This is really a law question, not a tax question; you are
likely to get better answers at misc.legal.moderated.
Perhaps, but he'd have to wait for a looooooong time.

Stu
 
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H

Harlan Lunsford

Herb said:
(e-mail address removed) (Jim Saga) wrote:
Assuming the checking account is still open, submit the
checks for payment, by depositing in your account. Unless
the outstanding checks have been cancelled (unlikely in such
a short time) they will be honored. If that is the case,
then problem solved.
The real problem is that banks will not normally cash a
check more than 6 months old. I don't know if this is
federal banking regulations or local custom or what. But
none of the banks I know will do that.

Perhaps it's just their way of applying the CYA principal.

ChEAr$,
Harlan Lunsford, EA n LA
 
H

Harlan Lunsford

rick++ said:
~Several google references say Indiana has passed the
Universal Commercial Code which allows banks not to honor
checks more than six months old. Individual banks are
allowed laxer policies.
Thanks rick. that's the ticket alright. the UCC, of course.

ChEAr$,
Harlan Lunsford, EA n LA
 
S

Stuart Bronstein

Harlan said:
The real problem is that banks will not normally cash a
check more than 6 months old. I don't know if this is
federal banking regulations or local custom or what. But
none of the banks I know will do that.
It's part of the Uniform Commercial Code. Banks can, if
they wish, cash older checks, but need not if they are more
than six months old.

Stu
 
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