Bank Account Interpleader

Why bank accounts end up in court

A bank account is a contract between the depositor and the bank. The bank’s job is to follow the account’s terms: who may withdraw, and who gets the balance when an owner dies. Problems start when someone tells the bank that the terms on file should not be followed. A sibling says the joint account with their late mother was only “for convenience.” An estate says a payable-on-death beneficiary was added under undue influence. Two people present competing court papers. The bank cannot know who is right, and it can be sued by whichever side it disappoints.

Interpleader lets the bank avoid that position. If the parties cannot agree, the bank files an interpleader (or responds to a lawsuit with one), deposits the balance with the court, and steps out.

The main types of accounts

The form of the account is usually the starting point. Terminology differs by state and by bank, but the common categories are:

The ownership rules in the table follow the Uniform Probate Code’s approach to multiple-party accounts. Minnesota is one state that has enacted the Uniform Probate Code,¹ and its Multiparty Accounts Act is a useful illustration. Other states use their own statutes, so the details can differ:

• During life, “[a] joint account belongs, during the lifetime of all parties, to the parties in proportion to the net contributions by each to the sums on deposit, unless there is clear and convincing evidence of a different intent.” A POD account belongs to the original depositor, “not to the P.O.D. payee or payees,” and an agent “has no beneficial right to sums on deposit by virtue of being named as an agent.”²
• At death, sums remaining in a joint account “belong to the surviving party or parties as against the estate of the decedent,” unless there is “clear and convincing evidence of a different intention” or a valid will specifically refers to the account. Sums in a POD account belong to the surviving POD payees.³
• Changing the form requires a written order “signed by a party and received by the financial institution during the party’s lifetime.”⁴

An account and a will can point in different directions, under different states’ laws. In a federal complaint filed in Florida, where the claimant charity is based, a bank alleged that a woman bought a certificate of deposit at an Ohio branch in 1998 and in 2009 added a religious film ministry as its payable-on-death beneficiary. In 2017 she signed a will in Washington with a “superwill” provision stating that it superseded the beneficiary designations on her bank accounts and that all her nonprobate assets would pass under the will, which left nothing to the charity. She died later that year without changing the POD designation. As the bank described the two laws, Washington’s statute lets such a will override nonprobate designations made before it, while Ohio’s statute provides that “[n]o change in the designation of the beneficiary shall be valid unless executed in the form and manner prescribed by the bank.” The estate claimed the account under the will, and the charity under the Ohio statute. The bank, holding about $167,000, said the answer might involve the Full Faith and Credit and Contracts Clauses, and interpleaded.⁵ complaint (PDF)

Why the bank can freeze the account

Banks are protected for paying according to the account terms, but that protection usually ends when they get notice of a dispute. Minnesota’s statute shows the typical structure.⁶

1. Payment according to the account terms discharges the bank. Payment made under the statute “discharges the financial institution from all claims for amounts so paid whether or not the payment is consistent with the beneficial ownership of the account” as between the parties, POD payees, or their successors.
2. Written notice of a dispute changes things. The protection “does not extend to payments made after a financial institution has received written notice from any person entitled to request payment” that withdrawals should not be permitted, once the bank has had a reasonable opportunity to act on it.
3. The bank may refuse to pay. A bank “that receives written notice … or that otherwise has reason to believe that a dispute exists as to the rights of the parties may refuse, without liability, to make payments in accordance with the terms of the account.”
4. Ownership is still decided separately. The protection for the bank “shall not affect the rights of parties in disputes between themselves or their successors concerning the beneficial ownership of funds in, or withdrawn from, multiple-party accounts.”

That last point is important. A surviving joint owner who withdraws the funds is not necessarily entitled to keep them. The estate or another party can still sue that person to establish who owned the money.

When banks interplead

A freeze can last a while, but it does not resolve anything. A bank typically moves toward interpleader when:

• the parties cannot agree on who should receive the balance;
• one side has sued the bank, demanding payment;
• the balance is significant enough that litigation risk outweighs the cost of filing; or
• the bank has been served with competing court orders or legal process.

The bank will name everyone with a potential claim: surviving joint owners, POD payees, the personal representative of the estate, and sometimes creditors. Whether the case can go to federal court depends on the federal interpleader requirements. Federal statutory interpleader requires at least $500 and two claimants who are citizens of different states.⁷ Many bank disputes involve family members in one state or modest balances, so they are often handled in state court, sometimes within the probate proceeding.

Checks after a customer’s death

The Uniform Commercial Code gives banks a short grace period after an account owner dies. “Even with knowledge, a bank may for 10 days after the date of death pay or certify checks drawn on or before that date unless ordered to stop payment by a person claiming an interest in the account.”⁸ A family member who believes checks written shortly before the death should not be paid needs to tell the bank promptly.

Disputed and fraudulent wires

A growing share of bank interpleaders involve wire transfers rather than estates. A common pattern is business email compromise: a fraudster impersonates an executive, a vendor or a title company, and a wire goes to an account the fraudster or an accomplice controls. Once the sender discovers the fraud, it asks its bank to recall the wire. The receiving bank may restrain whatever is left in the recipient’s account, but it cannot simply send the money back over the account holder’s objection without risking a claim from its own customer.

UCC Article 4A, which governs wholesale funds transfers, explains why a recall is not automatic. After a receiving bank has accepted a payment order, “cancellation or amendment of the order is not effective unless the receiving bank agrees or a funds-transfer system rule allows cancellation or amendment without agreement of the bank.”⁹ A related rule addresses wires where the beneficiary’s name and account number do not match. A beneficiary’s bank that does not know the name and number refer to different persons “may rely on the number as the proper identification of the beneficiary.”¹⁰ Article 4A largely allocates losses between the parties to the transfer. When the sender and the recipient both claim the restrained balance, interpleader lets the receiving bank step aside.

Not every disputed wire is a fraud recall. In a Texas complaint, the bank alleged that a business in Jordan wired $50,000 to an individual’s personal checking account, which had a zero balance before the wire. The wire record gave her account number in its beneficiary and credit sections and her name and address in the credit section, but also listed a company in the beneficiary section “without any further detail.” The company, with a letter from the sender authorizing it to claim the money, said the wire was meant for it as payment for its work. The account holder would not authorize the bank to debit the account. She had withdrawn about $1,070 before the bank restricted it, leaving $48,916.35, and the bank interpleaded that amount.¹¹ complaint (PDF)

How a recalled wire becomes an interpleader

The federal complaints in these cases follow the same sequence, and each step affects how much money is left to fight over.

1. Recall. The sender, or the sender’s bank, asks for the money back and says the wire was fraudulent. The sending bank may be a different bank from the one that received the wire. The receiving bank holds the money, so it is the one that files the interpleader.
2. Restraint. The receiving bank freezes what remains in the recipient’s account. It can restrain only what is still there.
3. Refusal. According to the complaints, the account holder, “[d]espite repeated requests,” refuses to let the bank debit the account and return the money.
4. Interpleader. Calling itself a “disinterested stakeholder,” the bank sues the sender and the account holder under 28 U.S.C. § 1335, relying on § 2361 for nationwide service of process. It typically asks to deposit the restrained balance, not the full amount of the wire, and to be discharged, with its fees paid from the fund under the deposit account agreement.¹²

Wire disputes can be too small for Rule 22. In one case the bank asked the court to let it pay the restrained funds straight to the sender, without first depositing them. The court refused. The amount was under the $75,000 diversity threshold and there was no federal question, so Rule 22 had no independent basis for jurisdiction, and § 1335 required the bank to deposit “the entire sum in dispute” or post a bond. The court gave the bank 14 days to deposit or face dismissal without prejudice. It added that, even with jurisdiction, it would not release money from the registry without a properly noted motion and “entry of a judgment via default or otherwise.”¹³ See statutory vs. Rule 22 interpleader.

Federal examples

• Wells Fargo Bank, N.A. v. Adelman (M.D. Fla. 2025). According to the bank’s amended complaint, as the court summarized it, a customer wired $87,000 to a business that also banked at Wells Fargo, then asked the bank to recall the wire as fraudulent. The bank restrained the recipient’s account. The recipient’s principal said the money was payment for electronics the customer had bought. The bank filed a statutory interpleader, and the court granted it in part. It held that the bank would be discharged on depositing the funds, and awarded fees and costs, relying on the deposit account agreement and on the Eleventh Circuit’s statement that the “usual practice is to tax the costs and fees against the interpleader fund.” It denied, without prejudice, the bank’s request for a permanent injunction against future suits, because the bank had not shown why res judicata would not protect it. It also declined to order the money paid to the customer directly, because entitlement is decided only after the stakeholder is discharged.¹⁴

• Wells Fargo Bank, N.A. v. Comments Solutions, LLC (D.N.J. 2020). A credit union wired about $134,000 to a business account and then reported the wire as fraud. The credit union alleged that its chief executive’s email had been hacked and used to order the wire. By the time the bank restrained the account, about $73,000 remained. The bank interpleaded the restrained balance. The account holder defaulted, and the court later awarded the bank its fees and costs from the restrained funds as a disinterested stakeholder that had conceded liability, deposited the money and sought discharge.¹⁵

• Money moved onward to a second account (W.D. Wash. 2019). According to the bank’s complaint, a Georgia company wired $40,000 from its account at another bank to a Washington business’s account. Some of the money was then moved to a personal account, at the same bank, of the business’s sole owner and signer. The sending company recalled the wire for alleged fraud four weeks later. The bank restrained both accounts, about $22,700 and $10,600, and named the business, the owner and the sending company.¹² complaint (PDF) After the deposit ruling described above, the court allowed the bank to deposit $33,310.95, which the bank represented was the entire sum in dispute. The bank was dismissed in December 2020. Default had already been entered against the business and its owner, and the court realigned the case with the sending company as plaintiff.¹⁶ minute order (PDF)

• Both accounts at the same bank (E.D. Va. 2024). Here the bank was on both sides of the transfer. According to the complaint, a customer wired $99,950 from his checking account to a Nevada company’s business account, both at the same bank, and the deposit account agreement governed the bank’s relationship with each of them. The company had “used, withdrew and/or transferred” part of the money. After the customer asked for a recall based on fraud, the bank restrained the $69,408.49 that remained.¹⁷ complaint (PDF)

• Many senders, one account (S.D.N.Y. 2020). According to the complaint, six people in five states sent five wires totaling $66,200 to accounts of two businesses with the same owner. Three wires went to one business’s account, which then moved $69,000 to the second business, “all but depleting” the first account. The other two wires went straight to the second business. The bank received recall requests for all five wires, each based on alleged fraud, and restrained about $64,150 in the second business’s account.¹⁸ complaint (PDF) The business and the two people who sent one of the wires together did not answer. The court entered a default judgment against them and ordered the bank dismissed once it deposited the restrained funds less its reasonable fees and costs. The bank deposited $56,215.21.¹⁹ amended default judgment (PDF) The court then ordered every claimant to file papers showing entitlement or be barred. Without a hearing, it ordered each of the four senders who filed paid the amount of their wire, plus interest, and directed that the remaining $515.12 be held in the registry until it became unclaimed. Nothing was ordered paid on the fifth wire, whose senders had defaulted.²⁰

For the sender, these cases show that speed matters: only money still in the account when the bank restrains it can be recovered through interpleader. In the Virginia case, about $30,500 of the wire was gone before the restraint, according to the complaint. Claims for the rest have to be pursued against the recipient or others directly. When several senders claim one restrained balance, each has to appear and prove its claim. In the New York case, the fund was paid out only to the senders who filed claims.

Competing legal process

Banks are also caught between creditors. A judgment creditor may serve a garnishment or restraining notice, the IRS may serve a levy, and a family court may issue an order, all against the same account. Which one has priority depends on state law, federal tax law and the timing of service. A bank unsure how to comply may interplead. If the United States claims a lien on the account, it can be named as a party under 28 U.S.C. § 2410(a)(5).²¹ See personal injury settlements for how federal tax liens and attorney liens are ranked against a fund.

Practical points for claimants

• Send notice in writing. If you dispute who should receive an account, a written notice to the bank is often what triggers the freeze. Oral complaints may not be enough under the governing statute or account agreement.
• Expect the bank to stay neutral. The bank will rarely take sides or explain its reasoning beyond the account documents.
• Get the account documents. Signature cards, account agreements, and any change forms (with dates) are usually the central evidence.
• Watch for setoff. Banks may have rights to apply account funds to debts a party owes the bank. Minnesota, for instance, preserves a bank’s right of setoff against a party’s share of a multiple-party account.²²
• Read the account agreement on fees. Deposit agreements often let the bank charge legal fees for responding to an adverse claim to the account, and courts have relied on those terms when awarding fees from the interpleaded balance.¹⁴
• Respond if you are served. If the bank files an interpleader and you are named, you have a short deadline to respond. See named in an interpleader: what happens next.

Footnotes

1. Minn. Stat. § 524.1-101 (“This chapter shall be known and may be cited as the ‘Uniform Probate Code.’”). Minnesota Revisor of Statutes. ↩

2. Minn. Stat. § 524.6-203. Minnesota Revisor of Statutes. ↩

3. Minn. Stat. § 524.6-204(a)–(b). Minnesota Revisor of Statutes. ↩

4. Minn. Stat. § 524.6-205. Minnesota Revisor of Statutes. ↩

5. Complaint for Interpleader ¶¶ 1, 8–17, Huntington National Bank v. Jesus Film Project, No. 6:18-cv-00704 (M.D. Fla. filed May 7, 2018), ECF No. 1 (citing Ohio Rev. Code § 2131.10 and Wash. Rev. Code §§ 11.02.005(10), 11.11.020). Allegations only. ↩

6. Minn. Stat. § 524.6-211. Minnesota Revisor of Statutes. The discharge applies to payments made under §§ 524.6-208 to 524.6-210. ↩

7. 28 U.S.C. § 1335(a). Cornell LII. ↩

8. U.C.C. § 4-405(b) (official text; each state enacts its own version). Cornell LII. ↩

9. U.C.C. § 4A-211(c). Cornell LII. ↩

10. U.C.C. § 4A-207(b)(1). Cornell LII. ↩

11. Original Petition for Interpleader ¶¶ 1, 10–14 & n.1, Wells Fargo Bank, N.A. v. Thomas, No. 4:18-cv-02503 (S.D. Tex. filed July 19, 2018), ECF No. 1. Allegations only. ↩

12. Complaint in Interpleader ¶¶ 1–3, 9–24, 28–30 & Request for Relief, Wells Fargo Bank, N.A. v. Meeel, Inc., No. 2:19-cv-01857 (W.D. Wash. filed Nov. 15, 2019), ECF No. 1. The same structure, including the “repeated requests” allegation, appears in the Virginia and New York complaints cited below. Allegations only. ↩ ↩²

13. Wells Fargo Bank, N.A. v. Meeel, Inc., No. C19-1857 TSZ (W.D. Wash. Feb. 24, 2020) (minute order, ECF No. 17) (citing 28 U.S.C. § 1335(a)(2) and State Farm Life Ins. Co. v. Jonas, 775 F.3d 867, 869 (7th Cir. 2014)). RECAP. ↩

14. Wells Fargo Bank, N.A. v. Adelman, No. 8:24-cv-546-KKM-AEP (M.D. Fla. Jan. 16, 2025) (order) (quoting Prudential Ins. Co. of Am. v. Boyd, 781 F.2d 1494, 1497–98 (11th Cir. 1986)). ↩ ↩²

15. Wells Fargo Bank, N.A. v. Comments Solutions, LLC, No. 1:19-cv-77-NLH-KMW (D.N.J. Sept. 9, 2020) (opinion). The hacking account is the credit union’s allegation, as the court described it. ↩

16. Wells Fargo Bank, N.A. v. Meeel, Inc., No. C19-1857 TSZ (W.D. Wash. Mar. 9, 2020) (order, ECF No. 19) (deposit of $33,310.95); PW Funding II LLC v. Meeel, Inc., No. C19-1857 TSZ (W.D. Wash. Feb. 9, 2021) (minute order, ECF No. 39) (bank dismissed by order of Dec. 18, 2020; parties realigned). RECAP docket. The docket lists a default judgment entered April 28, 2021 (ECF No. 44), which is not available on free sources. ↩

17. Complaint for Interpleader ¶¶ 1–3, 12–20, Wells Fargo Bank, N.A. v. Zhong Xin Hui Trade LLC, No. 3:24-cv-00124 (E.D. Va. filed Feb. 23, 2024), ECF No. 1. Allegations only. The docket shows the case closed on March 21, 2025. No ruling is available on free sources. ↩

18. Complaint for Interpleader ¶¶ 1–4, 6–11, 15–25 & n.1, Wells Fargo Bank, N.A. v. Starx Motors LLC, No. 1:20-cv-05455 (S.D.N.Y. filed July 15, 2020), ECF No. 1. Allegations only. The complaint gives the restrained balance as $64,151.12 in ¶ 2 and $64,151.21 in ¶ 24. ↩

19. Wells Fargo Bank, N.A. v. Starx Motors LLC, No. 1:20-cv-05455-AKH (S.D.N.Y. Mar. 31, 2021) (amended default judgment, ECF No. 60); id. (June 1, 2021) (order regulating proceedings, ECF No. 66) (deposit of $56,215.21; claimants who do not file are barred). RECAP. ↩

20. Wells Fargo Bank, N.A. v. Starx Motors LLC, No. 1:20-cv-05455-AKH (S.D.N.Y. June 30, 2021) (order granting motions to disburse interpleader funds, ECF No. 69), as summarized in the docket entry; id. (June 25, 2021) (ECF No. 68) (hearing canceled). RECAP docket. ↩

21. 28 U.S.C. § 2410(a)(5). Cornell LII. ↩

22. Minn. Stat. § 524.6-212. Minnesota Revisor of Statutes. ↩