Negotiable instrument
A check, draft or similar paper that can be passed on by endorsing it.
What it means
A negotiable instrument carries a promise to pay that travels with the paper. Endorsing it is what passes it on.
Ordinarily only the person it is payable to may endorse it, which is the problem a family faces with a check made out to somebody who has died.
Why it matters
It is a common and frustrating dead end: a refund, a final paycheck or an insurance check arrives payable to the person who died, and no bank will take it.
Some states solve it directly. Nebraska's small-estate statute lets a successor endorse such an instrument on the affidavit, and names the three sections of the Uniform Commercial Code it is overriding so the bank is discharged for accepting it.
When you are likely to meet it
- When a check arrives after the death.
- When a bank refuses a deposit because of the name on the front.
How this varies by state
Whether a successor may endorse one without letters is a matter of state law.