Is It Legal to Sign a Check Over to Someone Else?

Checks serve as widely accepted financial instruments, facilitating payments and transfers of funds. These documents function as negotiable instruments, meaning their ownership can be legally transferred from one party to another. This inherent transferability allows the original recipient of a check to sometimes redirect its payment to a different individual or entity.

Understanding Check Endorsement

Endorsement refers to the act of signing the back of a check to authorize its transfer or payment. When a check is signed over to another person, it involves a specific type of endorsement known as a special endorsement, also sometimes called an endorsement in full. The legal framework governing checks, primarily the Uniform Commercial Code (UCC), allows for this transfer of ownership. By endorsing a check in this manner, the original payee legally transfers their right to the funds to the new party. This process is generally permissible when executed correctly, ensuring a clear chain of title for the funds.

Steps for Signing Over a Check

The process begins with the original payee endorsing the back of the check by writing “Pay to the order of [New Payee’s Name]” in the endorsement area. Directly below this instruction, the original payee must sign their own name exactly as it appears on the front of the check. If the original payee’s name is misspelled on the check, they should endorse it with the incorrect spelling first, then write the correct spelling below it. This notation and signature make the check a “third-party check.” It is important to use ink and ensure legibility for proper processing.

Scenarios Where Endorsement May Not Work

While signing over a check is often possible, certain conditions can prevent or complicate the process. Checks already marked with restrictive endorsements, such as “For Deposit Only,” cannot be signed over. Additionally, checks that are considered stale-dated, typically those issued more than six months ago, may not be honored by banks. Conversely, post-dated checks, which have a future date, can sometimes be processed before their indicated date, as banks generally do not check the date before processing.

Banks also maintain policies regarding third-party checks, and some may refuse to accept them due to increased fraud risks or if they cannot verify the identity of all parties involved. For checks made out to multiple payees, the conjunction used dictates the endorsement requirement: “and” necessitates all named payees to endorse, while “or” allows any one of the named payees to endorse the check.

Processing an Endorsed Check

After a check has been properly endorsed to a new payee, that new payee will also need to endorse the check themselves before depositing or cashing it. This second endorsement, along with the original payee’s special endorsement, establishes a clear chain of ownership for the financial institution. Due to the increased risk of fraud associated with third-party checks, banks may require identification from both the original payee and the new payee, especially if the original payee is present during the transaction. Bank policies vary significantly on accepting third-party checks, with some major banks generally accepting them while others may have stricter requirements or refuse them entirely. If a bank accepts the check, funds may be subject to a hold period of several days while the transaction is verified.