I’m Begging You – Please Stop Giving Legal Advice To Customers

Written By: Jay L. Hack

bank clerk talking to a customer

I feel silly writing this blog, but once again, I find myself facing a mess because a bank gave legal advice to a customer. This time, a friend and her three siblings own a Delaware limited liability company that owns four rental properties in New Jersey. Her mother, the manager of the LLC, died last September. When my friend tried to change the signature on the LLC account, the platform officer told her she had to file the LLC in New Jersey and sign a new beneficial ownership certification. The friend then formed a new LLC in New Jersey in 2019 and gives that LLC’s filing receipt to the bank. The bank accepts the manager of the New Jersey LLC as the authorized signer, even though the Delaware LLC has owned the property since 2012.

This time, we do not expect a problem because the four siblings are all in agreement as to what should happen, but the bank is not always that lucky. Last time, not so long ago, a bank gave a depositor legal advice about how to have a guardian appointed to protect her property when the depositor seemed to be a little bewildered. The advice was wrong, and it only cost about $5,000 to fix the problem. Banks frequently give tax advice to customers, especially when it comes to IRAs or real estate loans, and that can be very costly.

Today’s Take Away? Please teach all personnel not to give legal advice under any circumstances. Instead, employees should deliver a simple, “Please check with your attorney or tax advisor because I can’t give you legal advice.” It’s hard to be sued for saying that, but “you don’t need a will if you put the account in joint names with right of survivorship,” could be very costly advice.

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