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Are bank accounts considered tangible assets or an outstanding loan to a financial institution?
By Dayan Shmuel B. Honigwachs
Loan or Deposit?
Thanks to modern-day banking, most of us can rest assured that our savings will not be lost due to theft or other natural causes. In the US and elsewhere, the government puts our minds at an even greater ease by insuring a certain amount of money in an account against the possibility of a bank default. Although our money is pretty much guaranteed at the bank, nevertheless, according to Halacha, it may be considered to be only a loan to the financial institution and not a tangible asset that is in the possession of the owner. This is because there is still a possibility that the account holder will not get his money.
Such was the unfortunate fate of my friend, who was exceedingly wealthy before the financial crisis of 2007. When he realized that some of his investments were going south, he tried his best to pull out and place the money in savings accounts. The problem was that the banks themselves were going bust, and the FDIC only insured up to a certain amount per person per bank. He ultimately lost a large amount of money because he had nowhere to put it.
This real-life example proves that a bank account is not really all that secure. In fact, even the amount of money that is FDIC insured, would not be considered to be a “Pikadon” (deposit), a status which is accorded to an actual object that was given to be guarded. Most Poskim (and perhaps all Poskim) would still consider the insured funds in the bank account as a mere Halva’a (loan).
This classification may have serious implications in Halacha. Whereas tangible assets, such as cash we hide under the mattress, will be subject to many of the basic rules stated in Shulchan Aruch; money that is owed to the person – as secure as it may be – is often subject to a different set of rules. In this article we will provide some examples of such cases and analyze the practical applications of the Halachic status of a bank account.
Setting the Terms
The Gemara in Gittin [1] discusses whether it is possible for a borrower to say: “שעבדנא לך לדידך ולכל דאתו מחמתך”— “I am obligating myself to pay you and whoever is demanding payment because of you”. Issuing such a statement would obligate the borrower to follow the lender’s wishes regarding the disbursement of the funds.
When one deposits money in a bank, they are – in essence – issuing such a proclamation. If the account holder (“lender”) asks the bank (“borrower”) to give funds to another party (through a check, wire transfer, or a direct expression of his will), the bank must follow the account holder’s orders. Similarly, it is understood [and probably stipulated somewhere on the account contract] that if there is a law that requires the owner or the bank to give funds from the account to an agency or party, the bank must duly comply.
A Legal Will
This may have a practical application in the case of a legal will. Most Poskim maintain that a will that was not written in accordance with Halacha is not binding in Bet Din. Therefore, if a person writes such a will, its beneficiaries would not be entitled to that money in Bet Din after his death.[2]
Accordingly, if a person has Yorshin D’Oraita — heirs according to Torah law — yet he chooses to grant a certain amount of money to an institution, or to friends or another relative who is not as closely related as the Torah-heirs, according to Halacha those individuals would not receive that money.
However, based on our aforementioned logic, if the deceased had money in a bank account or money that was invested in a venture owned by non-Jews, it is quite possible that these accounts or investments would not be viewed as a tangible asset of the deceased but rather as money that he lent to an institution. If so, it may be that the named beneficiaries of the legal will may request the funds from the bank, which legally – and as per the account holder’s will – is obligated to give them the money [while the law of the land (“Dina D’Malchuta”) does not override Torah law when both parties are Jewish, it does determine the law when one of the parties is not Jewish].
Still, there are a number of Poskim who hold that this Gemara’s rule only applies to real estate. In their opinion, a bank’s primary obligation would still be to the original account-holder, which would then automatically entitle his Torah-heirs to the funds, despite his legal will.
Lending via Check
This concept might also create another issue. The Gemara in Bava Metzia speaks of a situation in which a Jew lends money to a non-Jew and the non-Jew wants to repay him, but instead the Jew tells the non-Jew: “Give the money to that Jewish person, and that person will now owe the money to me”. The Gemara seems to say that such a transaction is not valid. Since non-Jews are not Bene Shelihut – viable agents according to Halacha – and in this instance, the concept of an agency, Shelihut, is required in order to effect this transaction, therefore, such a transaction would not be considered binding. As a result, when the non-Jew hands the money over to the second Jew and instructs him to pay back the original lender, that Jew does not become a borrower.
Accordingly, when a person lends money to another Jew by writing him a check, it is not clear why such a transaction is binding. This is because when the borrower receives the money, it is essentially as though the non-Jewish bank is an agent to obligate the Jewish borrower. Since non-Jews are not Bene Shelihut, it would seem that according to this Gemara the original non-Jewish borrower (the bank) would not be able to turn the recipient of the funds into a borrower. This would have tremendous repercussions in Bet Din, which – in light of the above – may not be able to treat those who borrowed through a check as real borrowers.
In order to solve this, let us introduce an important concept in Hoshen Mishpat[3]. The Halacha is that when one person causes another person to have Hana’a – a benefit of some sort – the recipient of that benefit is obligated to pay the value of the benefit to the person who granted him that benefit. In this case, we may be able to say that the lender’s actions were the direct cause of the borrower receiving this money; once the lender writes the check and instructs the bank to hand it over, the bank is forced to transfer the money into the borrower’s account. So the lender, in fact, created money in the borrower’s account, which is a benefit that is worth money. Therefore, since the lender created that benefit for the borrower, he can obligate the borrower to pay him back in exchange for receiving that benefit.
Buying an Etrog
Nowadays, in many circumstances, we must view fund transfers from one account to another differently than a physical transfer of money. The Shulhan Aruch states that when a person hands money over to someone else, the action effectuates what is known as a “Kinyan Kessef” – a transaction through money. Thus, in accordance with our discussion, a transfer of money through a bank may not necessarily be similar to a physical transfer of money from one hand to the other.
Many Poskim say that this would have implications in cases in which a person must make a Kinyan D’Oraita, an acquisition according to Torah law. For example, in order to fulfill the Mitzva of taking an Etrog, the Etrog must belong to the person who is shaking it, as the Torah specifies that it must be “lachem” – yours. Accordingly, if one would pay for his Etrog by handing a check to the seller, it is very possible that the person will not have a Kinyan D’Oraita – an acquisition according to Torah law – in that Etrog. This is because the check would not be considered Ma’ot (currency) and according to many Rishonim, only Ma’ot effectuate a Kinyan D’Oraita, not Meshicha (taking the object into one’s hand). According to these opinions, the only way to acquire an Etrog on a Torah level, is by paying the seller with cash.
Thus, when buying an Etrog, it may be a good idea to use an additional method of Kinyan, such as bringing the Etrog onto one’s property, which would effectuate a Kinyan Hatzer – acquisition through being in one’s domain. However, to rely on this method, a person would then have to determine whether or not his property is a valid form of acquisition of Kinyan Hatzer. For example, if the person rents the property, it may not be able to effectuate a Kinyan Hatzer. In addition, this creates a problem if a person will not be on his own property during the Yom Tov of Sukkot, but he rather in his parents’ or in-laws’ house, or if he is a teenager who still lives in his parents’ house.
I heard from Rav Shlomo Miller שליט”א, that when paying for an Etrog by check, one should take one dollar off of the price of the Etrog and then hand over a dollar bill in addition to the check. That way, it would be considered a “Milve U’Pruta” — a loan (the check) plus cash (the dollar bill) – in which case the Halacha is that the seller’s intent is to effectuate the acquisition by means of the dollar bill rather than the check, which would be a valid Kinyan D’Oraita.
Sources:
[1] י”ג ע”ב
[2] ש”ך ע”ג ל”ט
[3] עי’ ש”ך ק”ז ח’ קצה”ח שם ו’ נתיה”מ שם ז’