Death of a Member

Why do you need to know?

On the death of a member of a credit union, the member’s shares and any other accounts within the credit union form part of their estate. However, members can choose to nominate someone to receive all property held in the credit union, up to the value of £5000 (which is separate from the website). For any sums above this, or where a member has not opted to make a nomination, credit unions need to apply the usual rules, as outlined below.

It may be necessary for credit unions to seek legal advice in individual cases if they are in doubt about whether they should pay out to a claimant, particularly for larger sums. A credit union will have to use its discretion to balance protecting itself and its members against the understandable wish to be helpful and sympathetic to bereaved relatives and others.

The Key Points

• On the death of a member all their shares in the credit union account, including their insurance entitlement, forms part of their estate.
• However, a member can nominate any person, or group of people, to receive all their shares and money (up to £5000) in their credit union account on their death.
• When an individual tries to claim the funds of a recently deceased member, the most important thing to do is establish whether the member have a current nomination recorded and, if not (or if their shares exceed the nomination limit), then follow the steps below to establish whether they are legally entitled to the shares.
• Before the credit union transfers any funds to any claimant, you should also take a copy of the original death certificate.
• Outstanding debts of the member can be reclaimed by the credit union before any transfer to a nominated person or representative.
• Deposits above £5000 should be treated very carefully, according to the detailed guidance below.
• The law in Scotland differs  to that in England and Wales, please ensure you read the right section.

Putting into Practice

Definitions

An understanding of the following terms will assist you in dealing with deceased accounts:

Estate – The total of the deceased person’s assets, including bank and credit union deposits, insurance claims, house, personal effects and any liabilities due on death. 

Testate – Having made a Will 

Intestate – Not having made a Will

Personal Representative – Either the Executors named in the Will or the person administering the estate if there is no Will.

Executor – Person appointed by the Will to administer the estate

Administrator – Person appointed by the courts to administer the estate

Grant of Probate – Issued when there is a Will; confirmation of the estate and executor(s) named in accordance with the Will.

Letters of Administration – Similar to Probate but issued where there is no Will. Administrator(s) named to administer the estate.

Grant of Confirmation – Issued by the Sherriff’s Court in Scotland to identify executor(s) regardless of whether there is a Will or not.

Death of a member procedure

• Nomination
• Payment of funds
• What to do if funds are not claimed
• Dealing with objections

Nomination

Your first step should be to check your nominations register to establish whether the member had made a nomination – a nominated person they would like their shares to go to in the event of their death. A member may nominate any person, or persons, to whom any of their property in the credit union at the time of their death shall be transferred. You should maintain a register, or written, signed confirmation, of this.

Under Section 37 of the Co-operative and Community Benefit Societies Act 2014, the nomination can apply to up to £5,000 of the whole, or such part or respective parts as specified in the nomination, of any property in the credit union. This is the case in both England and Wales, and Scotland. The member’s insurance entitlement should also be included as part of this sum.

It is important to note, however, that the Act also states that a nomination is revoked when a member marries after making the nomination. If this is the case, you should treat the whole sum as you would that there was no nomination in place, as set out below (unless the member re-confirmed the nomination after the marriage).

The Act states that “ A nomination must be—made in any book kept at the society’s registered office”. Credit unions should therefore be operating a register of nominations.

The nomination cannot be overruled by the contents of the member’s will, unless they also formally change their nomination with the credit union prior to their death.

Where the nominee is a child

In England and Wales no inheritance can be paid to anyone under the age of 18, and in Scotland, under the age of 16. If the member has nominated a child under these limits, the Act states that the credit union can make payment to:

(a)a parent or guardian of the nominee, or

(b)any other person aged 18 or over who undertakes to hold it on trust for the nominee or to apply it for the nominee’s benefit and whom the society considers to be a fit and proper person for the purpose.

Such payments are made on the understanding that the child has the right to reclaim the funds from the adult when they reach the age of legal capacity. The credit union may therefore wish to insist that the adult they transfer the money to signs an indemnity form to this effect, prior to transferring the shares.

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Payment of funds

Where a nomination is in place and the value of shares* and insurance is under £5,000 (England/Wales/Scotland)

Payment should be made to the individual who has been nominated. The credit union should follow the following procedure:

• Identification should be taken from the individual in line with the credit union’s usual ID requirements.
• You should also take a copy of the death certificate.
• Ask the nominee to sign an indemnity to confirm that the funds are being claimed by the rightful person.
• The nominee should state their relationship to the deceased and confirm whether they are a current member in the credit union**.

Where a nomination is in place and shares and insurance * exceed £5,000 (England/Wales/Scotland)

• If there is a nomination form recorded and the value of shares* exceeds £5,000, you should make payment of the first £5,000 to the nominee, following the procedure outlined above, and the remainder forms part of the deceased’s estate, as set out in the guidance below.

Where there is no nomination recorded and the Estate is under £5,000 in England and Wales or under £36,000 in Scotland

• If there is a Grant of Probate, Letters of Administration or Grant of Confirmation in Scotland, provided by the claimant then you should make payment to them – you should take a photocopy and make payment to the named Personal Representative(s) as shown in that document, after checking their ID.
• Where Grant of Probate, Letters of Administration or Grant of Confirmation has not been applied for, you should seek to establish that the claimant is legally entitled to receive payment of the funds. It is worth noting that any payment is discretionary, and you may wish to seek legal advice in relation to larger amounts.
• In Scotland we would recommend credit unions also consider applying the £5000 limit, as they have no way of knowing the size of the whole estate. The credit union is under no obligation to make payment in these circumstances unless a Grant of Confirmation can be provided. The Co-operatives and Community Benefit Societies Act also sets out £5000 as the limit of recommended payments to those without Grants of Probate or Administration.
• You should also obtain a completed indemnity form confirming that the claimant is not aware of any other executor, administrator or other person that has legal claim to the estate. As a further safeguard, the indemnity form should be signed by the person making the claim before a solicitor or Commissioner for Oaths.
• The claimant must satisfy the credit union’s usual identification procedures to establish who they are.
• You should also take photocopy of original  death certificate.
• Spouses (including civil partners) who jointly held the accounts can access the funds without requiring a Grant of Probation/Confirmation.

Where there is no nomination recorded and the Estate is over £5,000 in England and Wales or £36,000 in Scotland

• You should not make payment unless they claimant has a Grant of Probate (in England and Wales) or a Grant of Confirmation (in Scotland).
• As set out above, we would suggest that the £5000 limit should also be enforced by credit unions in Scotland.
• Assuming there is, take a photocopy of it and make payment to the named Personal Representative(s) as shown in that document, after checking their ID.
• The claimant must the credit union’s standard identification procedures to establish who they are.
• Obtain completed indemnity form confirming that the claimant is not aware of any other executor, administrator or other person that has legal claim to the estate. The indemnity form should be signed by the person making the claim before a solicitor or commissioner for Oaths.
• You should also take photocopy of original death certificate
• Spouses (including civil partners) who jointly held the accounts can access the funds without requiring a Grant of Probation/Confirmation.
• If you are approached to make a payment and there is no Grant or Probate or Grant of Confirmation, you should advise them they will need to apply for it before payment can be made, as this is a legal requirement.

* The Co-operative and Community Benefit Societies Act 2014 states that a member may nominate any property in the society (whether in shares, loans or deposits or otherwise) at the time of his death. Therefore the proceeds from Life Savings insurance should be included in the figure when calculating the amount and to whom the proceeds are payable. ABCUL recommends that your membership form or nomination form clearly specifies this. Please see additional documents.

**If the nominee qualifies to become a member of the credit union they may transfer the shares into a credit union account in their own name. Such payment can only be transferred provided that the amount in the nominee’s account remains below the statutory threshold.

Any balance in excess of the statutory maximum shareholding should be paid in cash.

Life Savings insurance will count towards the value of the estate unless it has been specifically provided for within the nomination form/clause, so ought to be included in the figures referred to above.

You have the right to use shares or loan insurance against any outstanding loans of the member, after their death, before paying out the remaining funds to the nominated person.

What to do if funds are not claimed

In rare circumstances the credit union may have knowledge that a member has died but nobody has come forward to claim the funds held on behalf of the deceased. In these circumstances the credit union should place the funds into a suspense account and contact one of the following:

In England and Wales  

Assets that remain unclaimed become bona vacantia and pass to the Crown. The Bona Vacantia Division of the Treasury Solicitor’s Department administer the estates of persons who die intestate without known kin, and collects the assets of dissolved companies and failed trusts.

Contact the Bona Vacantia Department of the Treasury Solicitor at Treasury Solicitor 9(bv), 1 Kemble Street, London Wc2B 4TS. Tel: 020 7210 3116/7 or visit http://www.bonavacantia.gov.uk/.

In Scotland

In Scotland the doctrine of ultimus haeres states that the assets of those who die intestate leaving no other person entitled are to inherit pass to the Crown. If you would like to highlight such as case, you can contact the National Ultimus Haeres Unit on 0300 0204196 or 0141 420 8804, or at NationalUltimusHaeresUnit@copfs.gsi.gov.uk.

Dealing with Objections

Credit unions will no doubt be asked why there is so much paperwork. The main reason is to protect the credit union from a claim by a person with a better entitlement than one to whom a payment has been made earlier, and is in line with the requirements set out in law.

An indemnity form will offer some protection and gives you a right to recover monies from a payee in the event that an executor or other person with a better claim to the money should appear and claim the funds from a deceased person’s account.

Further guidance is available in the ABCUL Member Resource Library here.