Advocacy for Pay on Death law heightens as unclaimed funds may hit N1.3 trillion

>But for access to passwords of accounts or PIN codes to ATM cards of the deceased, immediate family members of many dead Nigerians go through hassles in accessing funds left by the deceased, forcing such accounts to go dormant, pushing the Central Bank of Nigeria (CBN) to consider mopping up about N500 billion in unclaimed balances in over 59.7 million accounts in commercial banks in the country. While there are no laws restricting the banks from providing the Pay on Death (POD) service to a willing client, most banks are not only keen but would rather hinge their decision on legislation. JOSEPH ONYEKWERE (Deputy Editor) writes on the necessity of legalising a practice that will make life easier for many Nigerians.

Mrs Amarachi Mark is a civil servant in Abia State. Her immediate elder sister, who worked in one of the state government agencies, took ill and eventually passed on a few years back.

During her lifetime, the deceased maintained an account with one of the new-generation banks. As an unmarried lady, she earned enough to take care of herself and her siblings, including her aged mother.

When she passed intestate, the family was devastated because she was the breadwinner. Worst still, their agony increased when they could not access the funds in her bank account.

“On approaching the bank to see how we could know how much she had and how to get it, the bank told us to get a letter of administration. Not sure of how much was in the account and considering the rigorous process of getting the letter of administration, we gave up the intention and moved on till today,” Mrs. Mark said.

Also, Mrs. Blessing Kramer married a Dutch citizen and they reside in Lagos. Unfortunately, the man passed away recently. Though he had a will, Mrs. Kramer is battling with the probate to get a letter to enable the bank to inform her of how much was left in the deceased’s account. Her lawyer told The Guardian that the process could be rigorous, tedious and discouraging.

The stories of the two individuals capture the ugly experience of many Nigerians, who are made to forgo the funds in the accounts of their loved ones, which would have helped to ameliorate their financial conditions, especially during and after the burial of the deceased account holder.

Following the difficulty in accessing such funds, the number of unclaimed funds in commercial banks is projected to rise above the speculated N1.3 trillion in the next one year, triggering the suggestion that a law should be made to mandate banks to provide Pay On Death (POD) form to every account holder.

The legislation will ensure that banks contact beneficiaries named by account holders in their POD before or when such accounts go dormant and transfer the funds to them, thereby mitigating the hardship, which supposed beneficiaries face to procure letters of administration.

Money left by the dead, opportunity for the government? Stakeholders believe that the major source of dormant funds is the demise of account holders and the onerous process of obtaining a letter of administration by survivors to claim the funds.The House of Representatives ad hoc committee investigating unclaimed funds in commercial banks said it uncovered N300 billion unclaimed funds in some commercial banks last year, adding that the funds could even get above N1.3 trillion.

Uyime Idem (PDP, Akwa-Ibom), who chaired the committee, said they were mandated to investigate the status of “the suspicious unclaimed funds trapped in commercial banks, including the advance payments for government contracts.”
Idem said the committee has so far discovered N300 billion and is upbeat about discovering more.

Nigeria Inter-Bank Settlement System (NIBSS) data showed that, of 191.4 million bank accounts, active bank accounts in the country stood at 133.5 million as of December 2021. NIBSS has no update on its website for 2022 yet. This means that there are at least 57.9 million inactive bank accounts both savings and current. Expectedly, over N500 billion have been left by their owners in abandoned bank accounts, majorly because their owners are dead or incapacitated.

Interested in the trapped funds, the Central Bank of Nigeria (CBN) on August 6 last year, issued a new regulatory framework that will see it take over billions of naira sitting in dormant accounts, and invest the proceeds in treasury bills and other government securities.

The guideline outlined the management procedures of funds trapped in dormant accounts, what the funds could be used for, pending refunds to customers, compliance expectations, monitoring and evaluation, dispute resolution and sanction for violations.
Eligible accounts, according to the document, are dormant accounts balances that have remained with financial institutions for 10 years and beyond.

The document said a contravention of any provision of the guidelines would attract a penalty of not less than N2 million, and for failure to comply with CBN’s directive in respect of any infraction, the party involved would pay a “further penalty of N200, 000 daily until the directive is complied with or as may be determined by CBN.”
Endless KYC to no end

Stakeholders are wondering why Banks usually request prospective customers to provide the details of their next-of-kin while opening a bank account, when such beneficiaries will be left in the dark upon the death of their loved ones?

Even when they make efforts to claim the estate, the process is so tedious that the cost sometimes undermines the money that the next-of-kin’s are trying to claim.

Managing partner, Alliance Law Firm, Mr. Uche Val Obi (SAN) explained that being a next-of-kin does not translate to an outright access to the money of a deceased in a designated account.

He confirmed that it is very common to see next-of-kin/intended beneficiary struggling for years without having access to the money in a deceased account, despite the intention of the deceased to the contrary.

He said: “The two instances where a next-of-kin can access the funds in a deceased account are (a) where it is explicitly stipulated in a will; (b) where there is no will but the person is rightfully the first in order of persons that can apply and obtain a letter of administration, and same has been done. Regardless, these two are not popular options because of the known bureaucracy in applying for a letter of administration or probate under the extant laws of various states.

“To obviate the difficulties mentioned above, it is recommended that the Pay on Death System (PODS) should be mandated and legalised in Nigeria. The PODS allows an account holder to designate a beneficiary who shall be entitled to the money in the account in the event of his demise, the bank shall pay the beneficiary the money from the deceased’s account upon presentation of a death certificate of the latter and a valid ID card of the former.

“Unlike the will or probate system, the PODS is faster and less bureaucratic. The PODS is a widespread practice in many developed countries. While the PODS is permitted in some banks in Nigeria, it is not pronounced and most customers are not aware of it. Thus, it is recommended that the PODS be made a mandatory practice for all customers in Nigeria as a matter of law.”

According to him, the implication is that all prospective customers will fill a POD at the point of opening their accounts, while existing customers shall fill theirs at the time of adoption of the recommended law. Such legislative intervention, he stressed, should be followed by widespread awareness to hasten compliance.
Stakeholders weigh in

Also, Managing Partner, TETRALEX Legal & Advisory, Dr. Jerome Okoro explained that there are three ways recognised by law to gain ownership of money or any asset belonging to a deceased person.
He listed them as: 1) Gift inter vivos -i.e. gift by the person during his lifetime. This, he said, requires a Deed of Gift to be valid and enforceable.

“If the money in the bank was given by deed or gift signed by the account holder in his lifetime, then it would not be part of the deceased’s estate upon his death. So, the beneficiary would be entitled to the money even after the giver’s death,” he stated.

The second, he said, is where a person is named in the deceased’s Will as beneficiary of the fund, then after the Will has been read, the named Executors of the Will would apply for Probate at the court.

With probate granted, the beneficiary of the fund under the Will, he said, can access the fund.
“In the absence of a Will, the survivors in the order of priority set by law such as spouse, parents, siblings, etc., would process Letters of Administration at the court. With the Letters granted, the Administrators can access the funds.
“These sets of people stated above need not be named in any document/form to be able to exercise their right over the estate including money in bank. If they were so named, it would be an inconsequential coincidence. The law is not concerned with next-of-kin in regards to a deceased’s estate.

“About the difficulty and delay in accessing funds, the process is rigorous, but it can be ameliorated. The first step is to involve a lawyer versed in probate matters. It is easier and faster where the deceased made a gift inter vivos or Will on the fund. But in the absence of those, the procedure of Letters of Administration is unavailable. The Probate Registry of Lagos State High Court has created an electronic platform for processing the Letters for ease and speed,” Okoro said.

He also recommended POD Form, which will be filled by an account owner, naming a beneficiary who can approach the bank upon the owner’s death to claim the funds, but added: “I have heard several complaints that banks are not honouring the POD requests. That is not surprising! POD is not backed by law and there is no law yet overriding or amending the probate laws of States to pave way for POD. So, a bank honouring a POD request is on the wrong lane. The peril is that the legitimate beneficiary of the funds under the three categories mentioned above may show up later to claim the funds, and the bank would be liable.”

Explaining the import of next-of-kin, Lagos based lawyer, Henry Mejulu said: “A next-of-kin simply is the person that they should contact in the event that someone cannot be found. It could be that the person is missing and that the account has been dormant such that the bank is unable to reach the recipient or the owner of that account. So, the natural thing is to call the next-of-kin, which could be like his wife, sister, daughter, brother, mother, his son and all of that.”

According to Mejulu, what banks usually do is that in the event that an account is dormant or the owner of that account has died intestate, before you can have access to such money, you’ll need to apply for a letter of administration from the probate of a high court.

“To even get those documents that will entitle you to the money is a very tedious process and the banks know this. For instance, if the deceased had say N3-N4 million in the account and the supposed beneficiary starts to process the letter, he will pay five per cent of government funds and will have to do PR costs to have this thing come out on time. And this coming out on time will take about nine months to a year, depending on how fast you can even be. So, what’s the essence of having to go through this entire process just to access funds in an account? What if someone is sick? What if someone needed the money urgently?

High Court

“I have seen instances where people have money in the account, the family members needed to use the money to resolve pressing issues, but because they don’t have this letter, they abandoned the money in the account. The banks are taking advantage of knowing that some people are unable to access the funds because they don’t have the letter, so they are taking out those accounts without the knowledge of the owners.

“I know Lagos state government came up with a law to the effect that any amount under N100, 000 don’t need to procure a letter of administration. I think it’s very poor and should be increased to say about N10 million. If the right family members come out, they should be able to have access to the funds.

“Alternatively, I think in other climes what is done to salvage the situation, particularly for banks, is to ensure that upon opening an account for anyone, there should be a form where the account holder will enter the name of a beneficiary in the event that he or she is no more,” he suggested.

With this arrangement, he said the bank would be obligated to notify the beneficiary that there is money in an account if it becomes dormant for say 24 or 36 months and the fellow will now confirm that the owner is no more and provide evidence of his or her demise to claim the funds.

While there is no law to back such up, Mejulu believes that banks must ensure they maintain their fiduciary duties of care and confidentiality with the document that has been given to them by the customers to be certain that the named beneficiaries won’t know until the demise of the account holder.

“Once that happens, the money goes to the named beneficiary. It will take away the hurdle of procuring a letter of administration of accessing money in a deceased bank account or spending several years to do so because you are unable to get the letter needed to access the funds,” he advised.

For Rafiu Bello of RBLawPlace, Lagos, the role of a next-of-kin is limited to being contacted on behalf of the person who nominated him in cases of emergencies or eventualities.

To access a deceased person’s funds in bank accounts, Bello explained that probate or letter of administration would be required.
Probate, he explained, will be required where a deceased died testate (leaving a will), whilst letter of administration is required where the deceased person died intestate (without a will).

“The two processes are court-supervised and are obtained from the High Court of the State where the deceased person’s assets are domiciled. Obtaining a probate or letter of administration can take varying amounts of time. The average time frame to complete the process could be less than a year or more. Usually, six to nine months if nobody tries to contest the grant.

“In complicated or contested situations, the process can take several years. Many factors account for this difficulty in obtaining probate or letter of administration. The factors can be grouped into two: namely, bureaucracy of the courts and complications from the deceased Estate e.g. disgruntled beneficiaries, size of the Estate et cetera.

“I believe that to address the bureaucracy in our courts in obtaining probate or letter of administration, the High Courts have to automate the process and embrace global best practices. I am aware that the High Court of Lagos State probate department has automated some aspects of the process but I believe lots more have to be done to further improve the process. There is a need to understudy the probate system of other jurisdictions that are efficient and use some of the methods compatible with our system to improve the probate system here,” he suggested.

Bello declared that the current state of the process of obtaining letter or administration or probate makes it very difficult for beneficiaries to access a deceased person’s funds and called for urgent reform of the system.

However, human rights lawyer, Chief Malcom Omirhobo believes that the current process of accessing deceased funds is good and only requires it to be made less rigorous, warning that introducing POD could open a great window of fraud.

His words: “The application to access funds of a deceased through the probate of a state High Court, either for those who died intestate, there is application for letters of administration or there is a will, which must be proved. After being proved, they have to now go to the banks to access the money. For both of them, they are good processes, which I support 100 per cent. If it is not done there’ll be fraud. There is nothing as evil as where the properties of a deceased person are being stolen, converted, diverted and dissipated from the beneficiaries against the wishes of the dead person, by people who do not have any relationship with the deceased. It is evil and there is nothing as evil as that.

“The government has seen a lot. That is why they want to ensure that whoever is benefiting from the funds of a deceased person trapped in the bank needs to be properly identified and the government also wants to collect tax. That is to say that the beneficiaries must pay a statutory fee of 10 per cent of the money in that bank. So, that’s another reason this thing is important. But if you just leave it to the bank to say transfer this money to a person upon my demise, some people could take advantage of that and perpetuate fraud.”

According to him, some people could collude with the bank to collect the money upon the death of the account holder. He argued that it is important that the government must know the identity of those who are beneficiaries of the money trapped in a deceased bank account and they also must pay tax on them.

The idea that the deceased should write that his money should be given to someone upon his death, he argued, will make the government miss the tax and give room to fraud.

“But the important thing here is that the process should be simplified as much as possible to make sure that upon an application, it shouldn’t take more than two weeks for the probate to write the banks to know how much is in the accounts.

“Again, there should be a purposeful approach to it because people are suffering. Those whose money is trapped are suffering. The beneficiaries want to go to school and move on with their lives because the money is there. So, it should be simplified so that the government can quickly get its money and the property of the deceased will be well guided, so that it will not be stolen or converted,” he suggested.