Small Estate Affidavit Rejected by Big Bank

Big Banks often wrongly reject valid Affidavits of Entitlement, keeping money from deserving Nevada families.

Big Banks will often wrongly reject valid small estate affidavit, illegally withholding money from deserving Nevada families.

Christmas is this week.  My Grandma passed away this year.  One of her very favorite Christmas traditions was to watch “It’s a Wonderful Life” on Christmas Eve. The villain in the story, Henry Potter, is a miserly banker who illegally converts $8,000.00 from the Bailey brothers, and sets George Bailey up for criminal charges.

I’m not going to say that our Big Banks in 2015 are exactly like Henry Potter.  However, today’s Big Banks frequently and illegally withhold money from Nevada families who attempt to administer a Nevada probate estate by small estate affidavit.  Below is the story of my friend Jane, who tragically lost her husband this year.  Her husband had some modest accounts with a Big Bank. When the Big Bank refused to honor her Nevada probate small estate affidavit, it became necessary to initiate litigation.

Nevada Probate Small Estate Affidavit Overview

Before we get into the story, a quick primer on small estate affidavits in Nevada probate, which are governed by NRS 146.080:

In Nevada probate, small estates may be administered by an Affidavit of Entitlement (often called a “small estate affidavit”).  This is a simple document allows heirs to claim the contents of accounts and retitle assets without courts or attorneys.

Estates may be administered by a small estate affidavit if there is no real property and

  • if the estate is worth less than $100,000.00, where the small estate affidavit is executed by the surviving spouse; or,
  • if the estate is worth less than $25,000.00, where the small estate affidavit is executed by someone other than the surviving spouse who is entitled to inherit the estate under a will, or, if there is no will, under NRS 134.

Big Banks are often one of the biggest families face when they attempt to us a small estate affidavit in Nevada probate.  Surviving spouses, children and other heirs often run head long into what feels like an insurmountable byzantine bureaucracy.  It can be a very frustrating experience.

Jane v. Big Bank, re: Small Estate Affidavit

Now to our story.  I’m not going to name the widow, the Decedent (husband) or the Big Bank.  For the purposes of this post, John, the husband, passed away sometime in the summer of 2015.  John left a wife, Jane, and three bank accounts with Big Bank, with a total value less than $10,000.00. Thus, John’s estate qualified to be administered by a small estate affidavit under Nevada probate law.

Jane is a personal friend.  After John died, she came by my office and I drafted up a small estate affidavit for her.  She took the small estate affidavit to Big Bank, where John held his bank accounts.  The employee at the Big Bank branch refused to honor the affidavit and turned Jane away, erroneously claiming the affidavit did not meet the requirements of NRS 146.080.

Jane returned to my office frustrated and distressed.  I called Big Bank’s out-of-state headquarters, and, after navigating a multi-layered automated phone system, I finally spoke with a non-lawyer Big Bank employee.  She didn’t know anything about Jane’s small estate affidavit.  A couple of days later, another non-lawyer Big Bank employee called me back.   The employee insisted the small estate affidavit did not meet the requirements of NRS 146.080.  I was then transferred to the employee’s supervisor, another non-lawyer.   The supervisor took the same position as the employee.  Both were flat out wrong.   So I asked to speak with an attorney.  I was told Big Bank had no lawyers in their Legal Department at the call center.

Jane is Forced to Initiate Litigation Against Big Bank

At this point, I was pretty angry with Big Bank and so was Jane.  The reason the Nevada Legislature enacted NRS 146.080 was to allow the speedy and efficient administration of small estates without courts and lawyers.  Big Bank’s incompetent employees and refusal to have an attorney review Jane’s small estate affidavit defeated the purpose of this very smart Nevada probate law.

So I told Jane that I would file a Petition to Compel and for Sanctions against Big Bank in Clark County Probate Court.  And I did.  Here’s the portion of the petition where I asked for sanctions:

This is from the Petition I filed against Big Bank. It asked for distribution of John's accounts and for sanctions for refusing to accept Jane's small estate affidavit.

This is from the Petition I filed against Big Bank. It asked for distribution of John’s accounts and for sanctions for refusing to accept Jane’s small estate affidavit in defiance of Nevada probate law.

I filed the petition and served it on Big Bank with a Citation to appear and show cause. A few days later, a friendly, very competent local attorney called me and told me he represented Big Bank.  This was the first time in the entire process that Jane or myself had any direct contact with a Nevada attorney.   It literally took initiating litigation against Big Bank to get Big Bank to have an attorney review the Affidavit of Entitlement!  Ridiculous!  The attorney had reviewed Jane’s small estate affidavit and recognized it was valid.  Jane was immediately paid the proceeds of the accounts.  Thus, the hearing became unnecessary and I took the petition off calendar.

I must say, however, I am interested to find out whether the Clark County Probate Court will sanction a Big Bank for failure to accept a small estate affidavit.

Big Banks are Incentivized to Reject A Small Estate Affidavit

I understand why Big Banks often behave this way.  They are incentivized to reject a valid small estate affidavit. Big Banks are naturally risk averse and usually don’t like to distribute money without a court order because they believe they are exposing themselves to liability.  Big Banks figure there is more risk in accepting 1 invalid small estate affidavit than in rejecting 1,000 valid affidavits.  Big Banks are also cheap.  They don’t want to pay to train employees or to have attorneys’ available to review small estate affidavits.  It’s cheaper for Big Banks to give Nevada families like Jane the run around.  The icing on the cake is that Big Banks are massive entities with byzantine bureaucracies that are not efficient, responsive or accountable.   Of course, none of these are valid reasons for a Big Bank to reject a valid Affidavit of Entitlement under NRS 146.080.

The way many Big Banks often treat Affidavits of Entitlement is wrong.  Nevada families are entitled to quickly and efficiently administer estates by an Affidavit of Entitlement without the court and without hiring an attorney.  Working and middle class families rely on NRS 146.080.  They need that money now, and are harmed by delays and obstacles created by Big Banks.

Reform is Needed from the Nevada Legislature

The Nevada Legislature should properly incentivize Big Banks to efficiently process small estate affidavits and honor Nevada probate law. I believe the Nevada Legislature needs to step in and create explicit penalties in NRS 146.080 for institutions who reject a valid Affidavit of Entitlement.  I believe a Nevada Court can currently impose sanctions under NRS 18.010(2)(a) against a Big Bank for refusing a small estate affidavit.  However, Nevada families should be protected by a penalty specific to banks and institutions under NRS 146.080.

For example,  under current Nevada law, if a bank rejects a valid power of attorney, the bank must pay attorneys’ fees and costs to the party who initiates litigation against the bank.

NRS 162A.370(3) provides:

A person that refuses in violation of this section to accept an acknowledged power of attorney is subject to:

(a) A court order mandating acceptance of the power of attorney; and

(b) Liability for reasonable attorney’s fees and costs incurred in any action or proceeding that confirms the validity of the power of attorney or mandates acceptance of the power of attorney.

This provision could be added to Nevada probate law in NRS 146.080, nearly word for word.  Just like a power of attorney, we don’t want banks to impose unnecessary costs on Nevada families using a valid small estate affidavit.  The only additional proposal that I would make is to add a minimum penalty of $5,000.00 paid to the Nevada family whose small estate affidavit was improperly denied by the bank.   The penalty paid by the bank in Nevada probate law needs to be sufficiently large to incentivize them to efficiently and accurately process small estate affidavits.  Right now, that incentive does not exist.  I would also propose giving the bank a reasonable amount of time to review the affidavit, probably 10 calendar days.

The Legislature doesn’t meet again until 2017.   Maybe I’ll make an effort to see if there is a member of the Assembly or Senate who would take up this cause to reform Nevada probate law as to small estate affidavits.  Other than opposition from Big Banks (certainly one of the mightiest political forces today), I believe this proposal to reform Nevada probate law would be met with widespread support.

 

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