When someone dies, surviving friends and family members must deal with both the emotional loss and the practical considerations that the death brings. Banks generally require evidence of a death in the form of a certified death certificate before closing an account. Depending on the type of account and its titling, the bank may or may not agree to close the account. If accounts must go through probate, banks cannot close them until the court orders them to do so and appoints an executor to the will.
The Federal Reserve allows for several types of account ownership. Single ownership accounts and joint ownership accounts are the most common. Some people establish trust accounts under their own Social Security number or a tax identification number. Many people add pay-on-death beneficiaries to their single ownership or joint ownership accounts. People can use these ownership types when opening checking savings or certificates of deposit accounts.
People listed as pay-on-death beneficiaries can close checking accounts after the owners have died simply by producing a death certificate and a valid form of ID. Trust accounts typically name the trust owner as trustee, but also name a successor trustee. When the trust owner dies, the successor trustee takes control of the accounts and acts as executor. The successor trustee does not have to close the account and can continue to transact on behalf of the trust.
Creating a living trust enables an individual to pass their assets to beneficiaries without having to go through probate. At account opening, the trust owner or trustee provides the bank with a copy of the trust document. The trust document explains how the successor trustee should distribute assets including checking account funds after the death of their trustee. Naming pay-on-death beneficiaries on single and joints ownership accounts also enables beneficiaries to close accounts without going through probate.
Many people continue to receive dividends checks and other sums of money after death. Keeping a checking account open enables executors, trustees and family members to keep track of the deceased's financial affairs as they attempt to settle the estate. Many married couples keep their deceased spouse's name on accounts for several months so they can negotiate checks and payments from various sources made payable to both the surviving spouse and the deceased.
The Social Security Administration normally requires two weeks' notice to stop direct deposit payments and Social Security income or disability benefits. If payments occur after someone dies, the Social Security Administration requires repayment and may initiate an electronic debit to reclaim funds. Leaving the account open simplifies the process. If an account must go through probate, you can notify the bank and asked it to freeze funds. Most banks will agree to do this if provided with a death certificate.