What Happens to a Bank Account when Someone Dies?
One of the most difficult tasks to undertake in the days and weeks (and sometimes months) following the death of a loved one is to close and/or manage their bank accounts. Unless your name is listed on the account (because you are the spouse of the deceased or because advance arrangements were made), you will have to go through a few hoops and hurdles to get all the accounts settled.
Even though you may need this money to cover funeral expenses, it is important to avoid writing checks in the deceased’s name or using their ATM card to access funds. This money is meant to go through the deceased’s estate first, which means that only the executor to the estate should be the one accessing it.
Joint Accounts and Trusts
The easiest way to handle the bank accounts of the deceased is to have a second name on the account prior to death. A spouse who shares a bank account often only has to show a death certificate and fill out a few forms to have the other name removed. The same is true of an adult child or other trusted family member who was added to an account while the deceased was still alive.
Trusts are another way to handle this sort of situation. Usually reserved for larger savings accounts or other estate-like settlements, putting the money into a living trust means that the trustee named can show a death certificate and take over the account.
Releasing Funds for Distribution
In the event that no advance plans were made to handle the bank account, it will be up to the family lawyer or executor to the estate to handle the details. This will include:
- Notifying the bank of the death (including providing a copy of the death certificate)
- Providing a formal release form to access the funds
- Emptying the accounts
- Closing the accounts
While this list makes the process look easy, it can be complicated by things like automatic payments. Because you cannot make changes to the account unless your name is listed on it, automated payments (to things like student loans, utility companies, etc.) will still go out—which can complicate financial matters later on. If possible, determine what payments go out when and contact those companies directly to stop the payments.
Leaving an Account Untouched
In some cases, the deceased may have accounts with very low dollar amounts or that are unknown to the family as a whole. It might seem easier to ignore these accounts until you are in a better frame of mind to deal with it. This is rarely a good idea. Because many banks have regulations regarding minimum dollar amounts, the number of deposits or withdrawals made per year, or overdrafts, you could end up owing money or depleting the account without even knowing it.
Always talk with the bank if you have additional questions. Because this is something they handle fairly often, they may be able to direct you to a resource for following their bank’s specific steps in dealing with bank accounts and death.