Page 42 - June 20, 2024 Bulletin

BUSINESS PARTNERfeature article

Death, Taxes, and

Financial Privacy?

Carol Ann Warren
JD - Associate General Counsel
Compliance Alliance

As the saying goes, there are two things for financial products from financial institutions. This regulation
certain in life, “death and taxes.” When requires banks to send certain disclosures related to privacy,
customers pass away, the bank has many information sharing, and information disclosure.
issues to deal with related to the death of an Under GLBA and Regulation P, the law and regulation are silent
accountholder, such as probate, payable on death as to the death of an individual and whether the requirements
still apply. Furthermore, this has not been litigated, so there is
accounts, family members, etc. One of the main not a case law precedent, like there is with RFPA. Fortunately,
questions related to death is what information the regulation gives some insight into this issue.
the bank can divulge without violating the Right A customer under Regulation P is referred to as a
to Financial Privacy Act (RFPA) and the Gramm “Consumer”, which is defined as “(1) Consumer means an
Leach Bliley Act (GLBA). individual who obtains or has obtained a financial product
or service from you that is to be used primarily for personal,
RFPA was enacted in 1978. The goal of RFPA is to limit family, or household purposes, or that individual's legal
the circumstances in which a government entity can access representative.” 12 CFR § 1016.3(e)(1). Therefore, there
financial information. Ultimately, the government can is an argument that the Regulation may extend past death
only access financial information in response to specific the death of a consumer due to the inclusion of the “legal
authorization by the consumer, subpoena, warrant, or a representative” text.
formal written request from a government entity.
As most bankers know, this is not the “end” of the
The RFPA does not extend past the death of the customer. customer relationship. There are many considerations and
While not explicitly stated in the regulation itself, there have responsibilities for the bank. The bank must pay payable-on-
been many court cases and opinions that solidify this point. death (P.O.D) accounts to the intended beneficiaries, facilitate
The bank must protect this information prior to death, but it estate accounts, communicate with executors, and comply
is not bound by the confines of RFPA after death. with applicable court orders. Ultimately, this leads to the

While that may be true, this likely does not give the bank question of what information the bank may divulge and to
the opportunity to freely release personally identifiable whom may the bank divulge that information.
information to the general public or the government. The Under RFPA, the bank will generally be allowed to
bank will ultimately need policies and procedures in place to communicate with Federal government entities. For example,
protect the financial information of the deceased to protect if the individual is receiving VA benefits, the bank has a
the bank, the individual’s estate, and the bank’s goodwill. responsibility to return those benefits after the bank receives

GLBA was enacted in 1999 and is facilitated through notice of the death of the account holder. The bank would be
Regulation P. This law took RFPA a step further. Regulation allowed to divulge that the recipient has passed and that the
P provides protections specifically for consumers who obtain funds are to be returned.

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