Legal Q&A: Negotiating Checks Using Transfer by Affidavit

Q: Can a check be negotiated using a transfer by affidavit?

A: It depends.

Whether a check can be negotiated using a transfer by affidavit depends on a bank's interpretation of the authority granted by the transfer by affidavit. Ultimately, it will be up to bank's check negotiation policy to decide.

Generally speaking, WBA recommends caution before accepting a transfer by affidavit as sufficient authority to negotiate a check, because the bank is not the "holder" of the property being transferred, so under the statute authorizing the Transfer by Affidavit procedure the bank is not able to rely on the affidavit to make the transfer. In addition, the maker of the check is not able to inspect the transfer by affidavit for endorsement verification purposes. 

This question typically arises involving checks made payable to a decedent's estate. To negotiate a check payable to the decedent's estate, the person presenting the check must be authorized to act on behalf of the decedent's estate. Without authority to act on behalf of the estate, the person cannot provide a proper endorsement on the check. So the question becomes whether the transfer by affidavit bestows that authority. Regardless, a bank might make a business decision to negotiate the check, but the bank would be taking on the risk that an improper endorsement claim could be made by the maker of the check.

WBA recommends reviewing bank check negotiation policies when determining whether to accept a transfer by affidavit as authority to negotiate a check.

Note: The above information is not intended to provide legal advice; rather, it is intended to provide general information about banking issues. Consult your institution's attorney for special legal advice or assistance.

By, Amber Seitz