What Happens to Bank Accounts When Someone Dies in the United States?

When someone dies in the United States, their bank accounts are usually frozen to protect their money and prevent fraud. This blog explains what happens next, including the role of the executor, how different types of accounts are handled, and what joint account holders can do. It also highlights the importance of notifying the bank quickly and seeking professional help to navigate the process smoothly.

What Happens When an Account Holder Dies

Upon the death of an account holder in the US, banks typically freeze the deceased's accounts. This protects the assets and prevents fraudulent activity. Here's what this freeze usually means:

• No Withdrawals or Transfers: No one can take money out or transfer it, even joint account holders or family.
• Automatic Payments May Stop: Recurring payments linked to the account might cease, including bills, subscriptions, or rent.
• Deposits Might Be Rejected: Pending income like pension payments or Social Security may be returned.

The Role of the Executor or Administrator

The person responsible for managing the deceased's estate is named executor in the will. If there's no will, the court appoints an administrator. To take control of bank accounts, they usually need to provide:

• Death Certificate: Proof of the account holder's passing.
• Letters Testamentary or Letters of Administration: These court-issued documents grant legal authority over the estate.
• Identification: The executor/administrator's government-issued ID.

How Different Account Types Are Handled

• Sole Accounts: Individual accounts become part of the deceased's estate. The executor/administrator uses funds to pay debts, taxes, and any bequests made in the will. Remaining funds go to beneficiaries according to the will or state intestacy laws (if there's no will).
• Joint Accounts: Generally, funds with the right of survivorship pass directly to the surviving account holder outside of probate. Exceptions can arise if there are estate debts or if the will contests the survivorship status.
• Trust Accounts: Assets held in a trust follow the trust's terms. The designated trustee is responsible, and these accounts typically bypass probate.
• POD/TOD Accounts: Funds in accounts with a payable-on-death (POD) or transferable-on-death (TOD) beneficiary go directly to the named beneficiary without probate.

What Joint Account Holders Can Do

If you held a joint account with the deceased:

• Limited Access: You might still be able to access funds briefly after the death to cover necessary costs like funeral expenses. Contact the bank immediately.
• Potential Challenges: Even with survivorship rights, there could be challenges if significant debts exist against the estate, disputes arise, or the will contests the ownership of the joint account funds.
• Seek Guidance: Consider speaking to an estate lawyer to understand your rights fully.

Additional Considerations

• Informing the Bank: Contact the bank or financial institution promptly following the death to learn their specific procedures.
• Small Estates: Some states have simplified affidavit processes for estates under a certain value threshold, allowing quicker release of funds.
• Estate Debts and Taxes: The executor/administrator must pay any outstanding debts and taxes of the deceased before distributing funds. If there isn't enough, creditors might not get paid in full.
• Direct Beneficiaries: Some accounts like life insurance, retirement plans (401(k)s, IRAs), or those with POD/TOD designations have named beneficiaries. These funds pass directly to those individuals outside the probate process.

Important Note:

Estate and probate laws vary from state to state. It's crucial to consult with an estate planning attorney in your specific state for the most accurate and up-to-date guidance.

Helpful Resources

• Federal Deposit Insurance Corporation (FDIC) – Deceased Accounts: ([invalid URL removed])
• State Government Websites: Search for "probate" or "estate law" plus your state to find specific laws and resources.

Seek Professional Advice

Navigating the estate administration process can be complex and emotionally draining. Consulting with an estate attorney and the bank's specialists offers valuable guidance. They'll help ensure a smooth transition of assets while adhering to legal requirements.