Understanding the role of ‘Next of Kin’ for personal and business banking

By Adwoa Birago NYANTAKYI

In modern banking, the inclusion of a ‘Next of Kin’ is a significant aspect of account opening, playing a role in customer management and emergency procedures. In Ghana, as part of the Know Your Customer (KYC) processes, banks require individuals opening accounts to nominate a Next of Kin.

However, despite its importance, this concept is often misunderstood, particularly concerning inheritance rights. The Bank of Ghana recently issued guidelines to clarify the role of Next of Kin, its legal limitations, and the criteria for selecting one.

The term ‘Next of Kin’ is generally understood as a person’s closest living relative who can be contacted for information about them if they cannot be reached. In the banking sector, Next of Kin serves a practical role, acting as a point of contact in emergencies or during critical situations like the death or incapacitation of the account holder.

Notably, in Ghana, the legal system does not provide a statutory definition of Next of Kin in banking operations, and the designation does not automatically grant the individual any legal rights over the account or its funds.

While the term Next of Kin is often used for personal banking, it also holds significance for business accounts. For business banking, Next of Kin refers to someone who can be contacted if the business owner or key signatory is unavailable or unable to manage the account.

However, in the same vein, this designation does not give the person any automatic rights to the business account or funds. The transfer of assets or management of business finances depends on legal procedures such as probate or intestate succession, rather than the mere listing of a Next of Kin.

During account opening, the bank typically asks for the name, address, and phone number of the chosen Next of Kin. This process ensures that banks have someone they can communicate with regarding non-financial matters if needed.

However, many people assume that the person designated as Next of Kin automatically inherits the account holder’s funds, which is incorrect. The inheritance of funds involves distinct legal procedures, such as probate or intestate succession.

Who can be a ‘Next of Kin’ for personal banking?

In Ghana, there are no strict legal criteria governing who can be designated as Next of Kin. The term is flexible, allowing account holders to choose from a broad range of individuals. Generally, the following people can be considered:

1. Immediate Family Members (comprising of spouse, children, parents, siblings etc). Immediate family members are often the most common choices since they are typically closest to the account holder and are expected to have the best knowledge of their personal affairs.
2. Extended Family (eg; cousins, aunts and uncles, nephews and nieces etc)In cases where the account holder may not have immediate family members or prefers someone outside their nuclear family, they can choose relatives from their extended family.
3. Close Friends or Trusted Associates: Some individuals may choose close friends or trusted associates, particularly if they feel these individuals are better positioned to manage emergency situations or provide reliable information when needed.

Who can be a ‘Next of Kin’ for business banking?

When it comes to a business account, the concept of Next of Kin is more complex than in a personal context, as business accounts are often tied to the structure of the company, ownership, and legal agreements rather than family ties. Here’s an overview of who can act as Next of Kin with respect to a business account, depending on the type of business structure:

• Sole proprietorship

In the case of a sole proprietor’s death, the Next of Kin, typically a spouse, child, or immediate family member, may be entitled to access the business account after legal processes, such as obtaining a death certificate and letters of administration or probate.

If the business owner had a Will, the executor (who might be a family member or other designee) would be responsible for managing the business assets, including the business account. This person handles closing the account, transferring funds, or maintaining it based on the business’s continuity plan.

• Partnerships

If a partner in a business passes away, the Next of Kin may not automatically have access to the business account. Instead, access is determined by the partnership agreement, which may specify how the deceased partner’s share of the business is handled.

The Next of Kin may only gain access to their share of the profits or ownership, not to the business account itself. In the absence of a clear succession plan, the executor of the deceased partner’s estate (who might be a next of kin) will handle financial matters, which may involve distributing any proceeds from the business account that the partner was entitled to.

Criteria for choosing a ‘Next of Kin’

While the legal system in Ghana does not impose any statutory criteria, the Bank of Ghana suggests that certain practical factors be considered when selecting a Next of Kin. These factors can ensure that the person nominated can effectively fulfill the responsibilities associated with the role:

1. Legal age: Banks typically recommend that Next of Kin be of legal age, which is 18 years and above in Ghana. Choosing someone of legal age ensures that they are capable of acting responsibly and providing the necessary information when required.
2. Responsibility and trustworthiness: The nominated person should be someone responsible, capable of making decisions or handling sensitive information, and willing to collaborate with the bank if any emergencies arise. Trustworthiness is key, as the bank will rely on this individual for important details about the account holder.
3. Closeness to the account holder: It is practical to choose someone who is geographically close or has regular contact with the account holder. This proximity ensures that the Next of Kin can respond promptly if the need arises. Additionally, the person should be familiar with the account holder’s lifestyle, preferences, and potential beneficiaries in case of death.
4. Clarity on role: The person nominated as Next of Kin should be clearly informed about their role. Since they do not automatically inherit the account holder’s assets, it is important that they understand their role is limited to providing contact information or assisting with legal processes (such as probate or intestate proceedings).

Legal misconceptions about Next of Kin in banking

A common misconception is that being named as Next of Kin grants automatic access or inheritance rights to the account holder’s funds upon their death. However, this is not the case.

The individual designated as Next of Kin does not automatically inherit the bank account or gain access to the funds. If the account holder dies, the funds in the account can only be accessed by the person named in the account holder’s Will. In such cases, the named beneficiary must obtain Letters of Probate from a court to claim the funds.

In the absence of a Will, the court appoints administrators through Letters of Administration. These administrators manage the deceased’s estate and distribute assets, including bank funds, according to the laws of intestacy.

Even if someone is named as Next of Kin, they would still need to provide legal documents, such as a death certificate, Letters of Probate, or Letters of Administration, to access or claim the deceased’s funds.

Importance of Next of Kin in banking

Despite the lack of inheritance rights, the Next of Kin remains an essential part of banking operations for several reasons:

1. Emergency contact: If the account holder is unreachable, incapacitated, or has passed away, the Next of Kin acts as the primary contact. The bank can rely on this person for essential information, helping to facilitate processes like closing the account or contacting legal representatives.
2. Legal and procedural facilitation: While the Next of Kin does not have immediate access to the account, they may serve as an important intermediary in helping family members or executors of the Will deal with the bank, providing necessary information or documentation during legal proceedings.
3. Providing essential information: In case of an account holder’s incapacitation or death, the Next of Kin may be called upon to provide details such as health conditions or emergency contacts. This necessitates the choosing of someone who is both knowledgeable and capable of responding efficiently to such situations.

Conclusion

The role of Next of Kin in banking is often misunderstood but holds critical importance, especially in emergencies and the management of an account holder’s estate after their death. While there are no stringent legal criteria in Ghana regarding who can be named as a Next of Kin, it is advisable to choose someone of legal age, responsible, and familiar with the account holder’s affairs. Importantly, being named as Next of Kin does not entitle one to inherit the account or access the funds; this can only be done through a legally binding Will or the court’s intestate process.

For business owners in Ghana, understanding the limitations of the Next of Kin designation in banking is important for avoiding confusion and ensuring proper planning. Careful selection of a Next of Kin, combined with a well-thought-out succession plan, is essential for the continuity and management of the business in the event of unexpected circumstances.

>>>the writer is an Associate at Sustineri Attorneys PRUC (www.sustineriattorneys.com). Adwoa specializes in Banking and Finance, Green Financing, Capital Markets, Projects, Infrastructure, and Construction, as well as Property and Land related legal matters. She welcomes views on this article via [email protected]

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