Does this bank have a right to do this with my parents' money?

[SquaresandStarlings]

Apologies if this is long but I wanted to get all the facts down. Both my parents sadly died last year (after long and happy lives) and we are currently going through probate which is due to be granted in early September.

A couple of weeks ago we got a letter addressed to them from the Castle Trust Bank saying that they had £12,000 in a savings account (£6000 each) that had matured, asking if they wanted to cash it in. I called and explained the situation and the person consulted his manager. He said that as each amount was under £10K he just needed to send me a form that I and my sister needed to sign, witnessed by our solicitor, after which they would release the funds to me.

When I got the form it asked if there was any inheritance tax to pay which there is. When I called the bank to query this they said that if an estate is over £20,000, which my parents’ is, then they require the grant of probate before they will release the funds, so it’s going to be months now before we can have this money.

My DH called them today to enquire further and was told that they were "just following the law". On pressing further however, it transpires that this is a policy set by them and has no legal precedent, so it seems entirely self-serving. A manager will be calling my DH back "within 24 hours”, but in the meantime I thought I would ask Mumsnet for advice.

Does this bank have the right to hang on to this money until probate, or am I within my rights to successfully challenge them and ask for it now?

Yes I think they have the right to do this.

I also forgot to mention that I have sent them the required certified death certificates.

Yes they can do this, we are going through the same thing now, my relative had money in several banks and each one has a different procedure!

My late DM had over 25k just sitting in a couple of accounts with Barclays, plus a house worth a lot of money. We didn't know if the estate would be liable for IHT for some time.
Nonetheless, Barclays' bereavement team were very helpful and released the funds to me within a few days of seeing the death cert.
Your bank/institution is just sticking to their own procedures and will cite that as justification. Whether it's worth a legal challenge sounds highly expensive.
Meanwhile, if it's germane, I think banks etc can release funds from deceased customers' accounts to pay for funeral costs when these have to be settled, before probate is granted if necessary.

I've just read the Bereavement section of their Terms and Conditions and it states “Depending on the value of the holdings, we may need to request a Grant of Probate before repaying any funds.”

That’s the rule that each account must be under £10K, which they are.

There is nothing in that section about the estate having to be under £20,000 though - surely I can challenge it if it's not even listed in their T&Cs (updated November 2022)?

It drives you mad. When DF died, it was more effort to get £30 out of M&S bank than £10,000 out of the Nat-West!

I also found when dealing with my dads probate and his multiple small accounts that the 1st person you speak to doesn’t necessarily understand the process and the actual procedure when it does emerge can be different from what you’ve been told.

That's more common than you might think. Newspaper personal finance columns have regular stories of banks demanding absurd things, like the consent of the deceased, before proving access to accounts.

In this case I think wanting sight of a sealed copy of the grant is reasonable.

The fact that some organisations will pay out or allow access sooner is down to how they manage risk. ISTR some require indemnities.

The can release money to pay debts in the estate - funeral costs are the obvious one.

Newspaper personal finance columns have regular stories of banks demanding absurd things, like the consent of the deceased, before proving access to accounts.

My dad had some shares in a managed fund. The company that runs it (a big, national one) refused to change the address to which they sent correspondence (dad's), despite having been sent originals of the death certificate, will, grant of probate and proof of my ID. I had to threaten them with the ICO, which only worked because I was the beneficiary, as well as the executor, so they were effectively sending correspondence about my financial assets to the wrong address. If I'd only been the executor, they'd probably still be writing to a dead man.