Probate cases often involve multiple safeguards designed to protect estate assets and beneficiaries. But even with court orders, bonds, and blocked accounts in place, things can still go wrong when protocols are not followed. 

This is one of those stories.

(This story also highlights the importance of having an estate plan in place to help avoid probate altogether.)

The Setup

The client in this case was the personal representative of a decedent’s probate estate with many heirs. They were appointed as the administrator of the estate with limited authority and were required to obtain a bond.

Limited authority means exactly what it sounds like. The administrator could not withdraw funds, sell real property, or take any significant action without prior court approval. The bond functioned as an added layer of protection, similar to (but definitely not the same as) insurance.

The Protected Account

The attorney handled the case properly up to the point of distribution. The estate’s real property was sold with court approval, and the sale proceeds were deposited into a blocked account.

A blocked account is a bank account that has court-ordered restrictions to prevent withdrawals or transfers without a court order. This helps to ensure the cash stays safe during the probate process.

When it was time to distribute the funds, the attorney obtained a court order that clearly stated how much each heir was entitled to receive (but this order was not on the Judicial Council Form MC-358). The attorney then prepared detailed, written instructions for both the client and the bank directing the issuance of cashier’s checks in accordance with the court’s order.

At this point, everything should have gone smoothly.

The Withdrawal

Despite multiple phone calls from the attorney to both the client and the bank manager, the bank issued a check in the client's individual name for the entire balance of the account. Yes, the bank went against court orders and, instead of issuing cashier’s checks payable to each of the heirs--their fair share of the estate's cash--the bank issued a single check to the client for the full balance of the blocked account.

The attorney did everything but yell and swear on the phone in attempt to stop the bank from proceeding. The warnings were clear and repeated.

The bank cut the check anyway.

The Fallout

After that, the client disappeared and was never heard from again. The estate was missing over $300,000. To this day, the client hasn't been located. 

To make matters worse, the bond that was supposed to protect the estate was only about ten percent of the total cash that went missing, nowhere near enough to cover the loss. 

The bank failed to follow proper blocked account procedures.
The client failed to follow the court order and stole all the cash- the estate's sole asset at this point.
The attorney got sued; the bank got sued; and the client (who was never to be seen again) got sued as well.  

The Lesson Learned

Why did the bank close the account and give all the money to the client? Every bank has its own practices, but it is unclear as to why the bank wrote a check to the client for the balance of the account. Confusion, laziness, and client's mal-intention are all culprits. 

Judicial Council Form MC-358, Order Authorizing Withdrawal from Blocked Account provides clear, court-issued authorization for the bank to release funds in the exact manner ordered by the court. It is designed to help prevent confusion, mistakes, and improper withdrawals and was revised and approved for mandatory use January 1, 2021. Although it happened in 2019, if the attorney in the example herein had used MC-358, this fiasco would likely have been avoided. A costly lesson was learned that day. 

In probate, precision matters. Clear court orders and the right forms can make all the difference between a smooth distribution and a nightmare scenario. If you'd like tips on searching for Judicial Council forms and/or learn how to use the California Judicial Council Publisher's List, check out this YouTube video.

By Travis Floyd

Training and Media Coordinator