When it comes to dealing with legal documents and transactions, most states require either a signature guarantee or an official notarization.
Both signature guarantees and notarizations verify the identities of the signing parties, but they serve different roles and require different levels of oversight. Depending on the document you need signed, you’ll need to know the differences between these two closely related roles.
To help you understand whether you’ll need a notary or not, we’ve put together a brief walkthrough of both signature guarantees and notarizations — starting with the importance of these witnesses in the overall scheme of things.
What Is a Witness?
Among other essential roles, signature guarantors and notaries also serve as witnesses.
A witness is a neutral third-party whose sole purpose is to observe the person signing the document. By doing so, they can ensure the validity of the material and the identities of both signers.
Most legal documents require a witness, whether it be a signature guarantor or a notary. Some examples include:
- Deed of Trust
- Mortgage
- Quitclaim Deed
- Grant Deed
- Warranty Deed
- Bills of Sale
- Power of Attorneys
- Stock and Trade Transfers
However, there is a distinct difference between the stamp of a signature guarantee and an authorized signature from a notary public. They do not have the authority to sign the same things, so it’s important to know which official’s signature is required for your documentation.
What is a Signature Guarantee?
A signature guarantee is a stamp used only on financial documents by a financial institution, such as banks, credit unions, trust companies, and brokerage firms. It is also called a “Medallion stamp” or “Medallion guarantee.”
You will need a signature guarantee if you’re transferring securities, such as stocks and bonds. The stamp of this witness is required by federal law since it authenticates your right to sell or transfer securities and also protects the person who owns it.
A signature guarantor is attesting that the person’s signature is valid and that financial institution will accept liability for any loss, error, or forgery. During the process, they will review the paperwork, witness the signature, and then apply the stamp. The stamp has embedded security features, which makes it difficult to copy or counterfeit and serves to protect the shareholder, the transfer agent, and the purchaser.
Most banks will have at least one person who is trained and qualified to provide a signature guarantee, but not every institution is automatically qualified to perform the stamp. To be able to imprint the signature guarantee stamp, financial institutions need to join a signature guarantee program, such as the Medallion Signature Guarantee Programs.
What is A Notarized Signature?
Most other legal documents require notarization, which is performed by a notary public — a state-appointed individual whose signature validates the identity of the persons signing a legal document.
A notary might also verify that both parties understand the contract they are entering. This isn’t always a guaranteed role as a notary, but they will perform this action if it’s included in a contract or agreement.
Additionally, a notary can authenticate legal forms like bills of sale, wills, powers of attorney, transcripts, certified copies of transcripts and birth certificates, and other documents.
So, What’s the Difference Between a Signature Guarantee and a Notarized Signature?
Simply put: Since a notary only represents themselves as an individual, they are personally responsible for the validity of their authentication. If the person isn’t who they say they are, they might be liable. On the other hand, a signature guarantee is an act on behalf of an entire institution, and is covered by insurance in the case of an error or forgery.
Financial institutions only give signature guarantees, and these are mainly used for financial and business documents like the trading of securities and assets like stocks and bonds.
Notaries serve as necessary witnesses and state officials tor several types of legal documents. Notaries must be commissioned by the state, and typically go through a separate certification process.
In cases that involve legal forms, contracts, or agreements, you’ll need a notary public. Even if one isn’t required, notaries can serve as a third-party witness, which is beneficial to all signing parties.
But aside from the ability to authenticate different documents, there’s a whole liability difference between a signature guarantee and a notarization.
Additionally, some financial transfers can be satisfied by a notary — however, this heavily depends on the dollar value of the transaction. Where there is more risk, you’ll likely need a signature guarantor. If there is low risk, a notary public might be enough to serve as an authenticator. Think of it this way: the more money that is at stake, the more likely it is that you’ll need a signature guarantee.
Conclusion
Depending on the document you’re dealing with, you’ll either need a signature guarantee or a notarized signature. Although it may seem like an unnecessary extra step, many documents are not legally binding unless they have either of these “stamps of approval.”
Now that you know the difference between a signature guarantee and a notarized signature, you can take the next step toward finalizing your important documents.
The good news is that you can find the right person for the job at TN Notary & Professional Services. Best of all? Our certified agents will come to you—anytime, anywhere. They’ll also arrive prepared with your documents and even ship them out for you if necessary.
So next time, skip waiting in line at your local government office or bank and book with us today!