Do Banks Freeze Your Accounts on Death?
There are many horror stories told by individuals who have been unable to access money in the account of a deceased, even in order to pay bills which were clearly those of the deceased.
The fact is that banks will in fact freeze accounts of an account-holder upon learning of the account-holder’s death. This can create significant problems where there are pre-authorized payments set up to pay all of the deceased’s bills, and other bills needing payment begin to accumulate. A bank will usually allow for payment of direct funeral expenses, and, in some cases, ongoing utilities, taxes, and condominium fees related to a property owned by the deceased. A bank may also allow for the payment of probate fees from the account. However, for all other needs the account will be frozen until the executor named in the deceased’s will has been officially appointed by the court (issuance of a certificate of appointment), which can and does take months.
We are often asked what someone planning their affairs can do to avoid this ‘cash flow’ problem for their estate. There are numerous potential solutions. One such solution involves understanding that bank accounts which are held jointly with another ‘with right of survivorship’, are not frozen. Title to those accounts pass automatically to the survivor, allowing the survivor to access that money immediately to continue to pay the necessary bills until a certificate of appointment of estate trustee has been issued by the court. So the answer is to put money into an account held jointly with a trusted spouse, sibling or child, to give access to much-needed funds to cover the cash-flow crunch.
However, it is extremely important that it be clear to everyone that the surviving account-holder is holding the account in trust, to be used for the deceased’s estate. If not, there can be an assumption by the surviving holder of the account that the account, or perhaps what is left after payment of the immediate bills, is his/hers alone, not to be shared with the others – and war can break out as a result.
Thus, if this is a technique that you wish to employ, you must be careful both to choose the right person to hold the account with you, and to make it clear to all involved that the money is to be used for the estate only.