September 2011
Volume 12, Issue 4
Check Payable Issues
Members and non-members present our front line staff with checks to be deposited or cashed.
Care must be taken to understand who can negotiate each instrument presented. The following
Q&A highlights situations that are most commonly faced.
Please Note: Michigan Credit Union League services are designed to provide accurate information with regard to the
subject matter covered, with the understanding that the League does not render legal services. For specific legal advice,
please consult with your credit union’s attorney.
Q. 1. How should our credit union handle checks payable to Corporations, LLC’s and
partnerships?
A. Such checks should be deposited into the account of the named entity. Cash back on deposits
should never be allowed. If the entity needs cash, it should write a check from the account. Allowing
such business entities to obtain cash back or to deposit checks into personal accounts can increase
the credit unions risk of being held responsible for assisting in tax evasion, in theft from the company
or in defrauding the entity’s creditors.
Q. 2. Who can negotiate a check payable to “Cash”?
A. A check payable to “cash” can be negotiated by any person who holds it. There is no legal
requirement under the Uniform Commercial Code for the check to be endorsed, as checks payable to
“cash” are treated as cash.
Q. 3. Our member has presented a check payable to himself and his deceased wife, and it is
dated after her death. Can he negotiate it?
A. It depends. If the word “and” or the ampersand (&) appears betweens the names, then no. If the
word “or” appears or if there is no conjunction between the names, then yes.
Q. 4. If a check is payable to more than one individual without indicating “or” or “and,” are all
individuals required to endorse the check?
A. No. Section 3-110(d) of the Uniform Commercial Code considers the drawer’s intent ambiguous
when the intent is not made clear through the use of “or” or “and,” and so permits negotiation by any
one of the payees.
Q. 5. Who can negotiate a check payable to two different people with “and”, but has joint
tenants listed in the title?
A. Because the payee includes the word “and” the signatures of all payees are required. Typically
captions such as joint tenants appear because an account from which the check was issued is held
as joint tenants; it does not however describe the ownership of the check.
Q. 6. Who can negotiate a check payable to “John Doe, deceased?” What about a check
payable to “John Doe, deceased and Jane Doe?”
A. In both cases the estate of John Doe is the payee, requiring its endorsement. Jane cannot
endorse the second check on her own because of the use of “and” between the two payees. The
estates endorsement may only be made by the personal representative of the estate. The credit
union would need to obtain documentation of the personal representative’s court appointment before
accepting the endorsement.
Q. 7. Must a government issued check (i.e. tax refund) payable to husband and wife be
deposited into a joint account?
A. No. There is nothing prohibiting the husband from depositing the check into his own personal
account, as long as both parties have endorsed it. However, if the check is not endorsed, the credit
union can apply the provisions of section 4-205 of the Uniform Commercial Code and deposit it into
an account jointly owned by the payees.
Q. 8. Are we required to cash our cashier’s check payable to a non-member?
A. Your credit union is directly liable on its cashier’s checks. The only time you should refuse to
cash a cashier’s check issued by your credit union is when you are unable to identify the payee.
Q. 9. If our credit union cashes a check for a non-member, are we required to obtain the
social security number of the payee in addition to photo ID details?
A. If the transaction where to trigger the filing of a CTR, then yes, the credit union would need to
have all the information necessary to complete the form which includes a tax identification number.
Some credit unions will have a requirement to collect the SSN for smaller transactions, for example
checks over $3,000, in case aggregated transactions would trigger a CTR filing.
Q. 10. Who can negotiate (deposit or cash) a check payable to “John Doe for Sally Doe”?
A. John Doe must endorse the check and is able to deposit or cash it. Often times the “for Sally
Doe” is used when Sally is a minor or legally incompetent. In either case, Sally is not the payee and
is not entitled to negotiate the check.
Q. 11. Can John deposit the following check into his personal account, “John Doe Execs,
Estate of Jane Doe?”
A. No, the check is made payable to John in his executor capacity and should only be deposited into
the estate account of Jane Doe.
Q. 12. How do we handle a check payable to “John Doe, custodian Sally Doe UTMA?”
A. If Sally is a minor (under 18 in Michigan) the check must be deposited into an Uniform Transfers
to Minors Account (UTMA) for Sally. If Sally is no longer a minor, John and Sally both need to
endorse the check which can then be deposited or cashed according to Sally’s wishes.
More information on the proper endorsement of checks, deceased member issues, and UTMA
accounts can be found on the Accounts Channel of InfoSight.
Jody Dabrowski is the MCUL’s compliance helpline consultant. You can contact her at
[email protected].