What Is a Deceased Account?
A deceased account is a bank account, such as a savings or checking account, that's owned by a deceased person. A bank will freeze the account when it receives notice that a customer has died while waiting for direction from the authorized court regarding payment to heirs and creditors.
Key Takeaways
- A deceased account is a bank account owned by a deceased person.
- Banks freeze access to deceased accounts, such as savings or checking accounts, pending direction from an authorized court.
- Banks generally cannot close a deceased account until after the person's estate has gone through probate or has otherwise settled.
- Joint accounts that are held together with a surviving owner are not considered deceased accounts. Ownership of these accounts reverts to the surviving owner.
- The bank will not freeze the account if it's a payable-on-death account. It will release the funds to the named beneficiary when provided with the deceased's death certificate.
Understanding Deceased Accounts
The next of kin must notify their banks of the death when an account holder dies. This is usually done by delivering a certified copy of the death certificate to the bank, along with the deceased’s name and Social Security number, bank account numbers, and other information.
The bank may also require other documents, including court-issued letters testamentary or letters of administration naming an executor or administrator of the deceased’s estate.
Joint Accounts and Payable-on-Death Accounts
Accounts that the deceased held jointly with a surviving heir are not considered to be deceased accounts. Ownership of these accounts reverts to the surviving owner, who may close the account or continue to use it. The bank should release the money to the named beneficiary if the account is a payable-on-death account when it's been provided with a certified copy of the deceased’s death certificate and the named beneficiary produces adequate identification.
Powers of Attorney on Deceased Accounts
Power of attorney arrangements end when a person dies. A survivor may have held a power of attorney that allowed them to access an account when the account holder was still alive, but they’ll no longer have access when the bank has been notified of the account holder’s death.
Trustees of Deceased Accounts
Trustees named before the death of the account holder should be able to access the deceased account. A trustee is responsible for administering the deceased person's assets that are held in a living trust and has a fiduciary responsibility to act in the best interests of the beneficiaries. Trustees must have proper documentation, including identification and a copy of the trustee provision, to access the deceased account.
Closing Deceased Accounts
A bank usually cannot close a deceased account until the person’s estate has been settled and closed, typically through probate. The probate court will appoint an executor or administrator if one is not named in the deceased’s will or if the deceased didn't leave a will. This person will have the authority to close the deceased accounts and distribute the funds therein to heirs and creditors.
Placing a Deceased Alert
A deceased alert notifies credit card companies that an account holder has died. Credit reporting agencies such as Equifax, Experian, and TransUnion will issue an alert that will appear on the person's credit report. The alert informs credit card companies to deny credit transactions on the card going forward. The deceased person's family or executor should contact the credit bureaus to ensure a deceased alert is placed on the person's credit report.
It's important to place an alert on a deceased person's credit report to prevent identity thieves from using the person's identity for financial gain.
What Is a Living Trust?
A living trust is formed during an individual's lifetime and holds ownership of their assets. It's typically closed after death and the assets such as bank accounts are then transferred to living beneficiaries according to terms set by the deceased. A trustee manages the assets. The individual who forms a revocable trust typically acts as trustee during their lifetime and a successor trustee takes over when that individual dies.
What Does "Intestate" Mean?
An intestate estate is one for which the deceased did not leave a will, form a trust, or take any other steps to direct how they want their estate settled and who they want to receive their assets. Their debts are paid from estate assets and anything left over is distributed to beneficiaries according to their state's law based on their relationship to the deceased. More distant relatives and friends are typically left out.
What Is an Estate?
Cornell Law School defines an estate as "the total property, real and personal, owned by an individual prior to distribution through a trust or will." It's everything you own at the time of your death, including bank accounts.
The Bottom Line
Bank personnel are typically restricted from providing practical advice to heirs regarding how to handle the affairs of a deceased customer's account. Some banks do have estate units, but it's advisable to obtain legal assistance or contact the appropriate court for direction regarding how to handle a deceased person’s bank accounts.
