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Home >> Special Situations >>Incapacitated Individuals
Mentally Ill Daughter Writes Bad Checks: Liability
My daughter is mentally ill and lives in another state. We have a joint account, so I can transfer her disability money to her online. Without my knowlege, with a 1-800 number, she ordered a box of checks for this account. She wrote about twenty bad checks and the bank advised me to close the account because I had no idea what was going on. The checks have my name on them as well as hers, but she is the one who wrote them. Am I going to be held responsible?
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 Virtually every deposit agreement includes language that makes joint account owners jointly and severally liable for overdrafts in the account. That's legal jargon that says the bank can collect from either of you for an overdraft, regardless of which of you created it.
Without such language, your liability would depend on your state's laws, most often the Uniform Commercial Code, section 4-401(b), which reads "A customer is not liable for the amount of an overdraft if the customer neither signed the item nor benefited from the proceeds of the item," in most states. That language should protect you from a third party to whom your daughter's checks might have been bounced, even if you are liable to the bank for any overdraft balance.
The only way you can avoid this from happening again is to close the account and make other arrangements to get your daughter's funds to her. The overdraft will have to be resolved to do that. Your bank has given you good advice.
The bank should not need agreement from your daughter to get the account closed. However, you should notify her that you're doing it so that she won't unknowingly make matters worse by writing checks on the closed account.
Published on BankingQuestions.com 10/06/09
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