Bank pays $150,000 for estate mistake

Abank has paid roughly $150,000 in compensation after its mistake led to a 102-year-old’s accounts transferring to a ‘‘friend’’ after her death, despite her will directing the money to be shared with five other people.

The case came to light after executors for the woman’s estate complained to the Banking Ombudsman.

Ombudsman Nicola Sladden investigated, and found the bank had made serious errors in signing up the friend as a joint account signatory in 2015, when the elderly woman was 97.

Sladden found the woman was not warned by the bank that adding her friend as a joint signatory would transfer the ownership of her accounts to her friend at her death, removing the money from her estate.

The woman’s will, which she drew up in 2014, showed the money in her accounts was intended to be split equally between six people, the friend included.

The ombudsman has published the bank’s mistake in a ‘‘case note’’, which does not name the bank, but serves as a reminder to banks of their duties of care to vulnerable, elderly customers.

In it, Sladden says the bank failed to act with reasonable care and skill, and ordered it to pay $115,000 plus interest and costs to the woman’s estate to put it in the position it would have been in had the accounts remained sole accounts on the woman’s death. That added up to around $150,000.

Banks have a higher duty of care to elderly people under the Banking Code of Practice from the New Zealand Banking Association Te Rangapū Pē ke, and promise to train their staff to ‘‘recognise, escalate, and respond to possible financial abuse’’.

Sladden said the woman did her banking at a branch at her retirement village, where bankers should be skilled at dealing with vulnerable, elderly people.

‘‘You would expect them to be well-trained to support those customers,’’ she said.

She found that the friend was added as a joint signatory to some of the accounts around five years before the elderly woman’s death.

But at the time the woman was living in a retirement village where most of her living expenses were deducted automatically from her account.

The friend already had authority to operate her accounts to help her manage her financial affairs, Sladden said, so there was no need to be added as a joint signatory.

Sladden was not satisfied the bank had explained the ramifications of adding the friend as a signatory to her accounts.

‘‘We were not satisfied the bank had ensured [she] was making the request of her own free will, or that the full implications had been made clear to her,’’ Sladden said.

‘‘We were not satisfied it was ever [her] intention that the funds held in her accounts become solely owned by the friend on her death,’’ she said.

Executors discovered what happened when lawyers for her estate tried to close her bank accounts and the bank would not close the ones that had become joint accounts.

Nor would it provide any information on them to the lawyers, saying that on the woman’s death the joint accounts had reverted to the surviving joint account holder.

The lawyers then discovered the joint account holder was an executor of her estate, and was to receive a sixth share of it, Sladden said.

The lawyers asked the friend to pass the joint account funds to the estate, and to consent to the disclosure of information from the bank about the accounts, but Sladden said the friend refused.

Nicola Sladden Banking ombudsman

‘‘It’s a very salutary tale for the banks.’’

‘‘The lawyers applied to the courts to have the friend removed as executor. Eventually the friend consented to the release of the information,’’ Sladden said.

‘‘A bank has a duty to exercise reasonable care and skill when adding someone to a customer’s account, especially if the customer is elderly or otherwise vulnerable.

‘‘It should talk to the customer separately and in private about the reasons for the request, check the request is necessary to achieve the customer’s purpose, explain the full implications of the request, check whether a power of attorney or guardian has been appointed, verify that adding another person to the account will not be the detriment of the customer,’’ she said.

The bank should also keep detailed records in such cases, she said.

‘‘It’s a very salutary tale for the banks about the importance of providing that extra level of care to someone in those circumstances, and documenting it well,’’ Sladden said.