Was bank wrong on funeral costs?

Brendan* is confused and upset. A bank manager has stopped his wife and her sister, enduring powers of attorney for their mother, from withdrawing money for her funeral. He asks estate planning lawyer Rod Cunich for clarification.

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Q. Brendan

My wife and her sister held enduring power of attorney for their mother. Shortly before their mother’s recent death, they attempted to withdraw funds from her bank account to pay for her funeral, knowing that their power of attorney would expire on their mother’s death. One daughter had been operating this account for a number of years. The bank manager refused point blank to permit the withdrawal, referring vaguely to “the law”.

The manager said that she would make payment of funeral expenses on presentation of the funeral director’s account, after the event. To pay, in advance, for catering for the memorial function after the funeral, the manager required a written quote for the function.

My understanding is that while their mother was alive, the powers of attorney had full and unrestricted legal authority to operate her bank accounts.

I further understand that, on their mother’s death, all assets of the estate would be frozen by law, and held in trust by the executor, pending grant of probate, and distribution by the executor, in accordance with the will.

My questions are:

1. What law gives a bank manager the right to interpose him/herself between their mother’s funds and their powers of enduring attorney, and limit their access to funds?

A. The short answer is none, unless the power of attorney is defective, or the mother has lost mental capacity and the power of attorney is not an ‘enduring’ power of attorney. Only an enduring power will continue to operate once the mother loses mental capacity.

2. In particular, what law gives a bank manager the authority to withdraw funds from a deceased estate while it is in the sole custody of the executor?

A. None.

3. What actions do you recommend to permit powers of attorney to fulfil their responsibilities unhindered by third parties? This has been an unpleasant, confusing and distressing event, in a situation in which the parties had previously gone to the trouble and expense of setting up powers of attorney, in the clear understanding that this sort of debacle would not occur. If the law is as claimed by the bank manager, this should be waved around like a stinking fish, so as to warn others who might be planning responsibly to act, or who are in fact currently acting, for aged parents.

A. Have a lawyer write a letter to the bank demanding it comply with the power of attorney. The first step is to engage a lawyer who will advise whether there is a problem with the power of attorney. Once their mother passes, the executor has the sole power to gather in assets (including bank accounts) and pay expenses. By statute, funeral expenses enjoy priority over other debts and are paid once probate is granted. An executor has an obligation to pay the funeral expenses if there is money in the estate. Funeral directors commonly wait for probate to be granted before requiring payment of funeral expenses.

* Not his real name.

Rod Cunich is a lawyer and author with more than 30 years’ experience who specialises in estate planning. If you have a question for Rod, simply email it to [email protected]. His book, Understanding Wills and Estate Planning, has recently been updated and is available from all good bookshops.

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