Do Banks Freeze Accounts When Someone Dies?

When a loved one passes away, navigating their financial matters can be challenging. Many individuals wonder if bank accounts are frozen and how funds can be accessed. Banks follow specific procedures and legal requirements to ensure assets are managed and distributed properly during this time.

When Bank Accounts Are Frozen

Upon receiving official notification of an account holder’s death, typically through a certified death certificate, banks generally freeze individual bank accounts. This action is a standard protective measure, not a permanent seizure of funds. The primary purpose is to safeguard the deceased’s assets, prevent unauthorized transactions, and ensure funds are distributed according to legal processes, whether through a will or state intestacy laws. Funds held in individual accounts become part of the deceased’s estate and cannot be accessed until a legally appointed representative steps forward.

Accounts That Remain Accessible

Certain types of bank accounts are designed to bypass the freezing process upon an account holder’s death. Joint accounts with “right of survivorship” are a common example; the surviving account holder usually retains full access to the funds by presenting a certified death certificate. This arrangement ensures funds transfer directly to the surviving owner, often avoiding the probate process for that specific account.

Another accessible option is a Payable-on-Death (POD) or Transfer-on-Death (TOD) account. These accounts allow the owner to designate a beneficiary who can directly claim the funds upon the account holder’s death by presenting a death certificate and identification. POD and TOD designations enable assets to bypass probate, offering a streamlined transfer to the named beneficiaries. Funds held within a formal trust, specifically a trust-owned bank account, are also generally managed differently. A successor trustee, named in the trust document, can typically access these funds without court involvement.

Obtaining Authority to Access Frozen Funds

Accessing frozen funds typically requires obtaining formal legal authority, usually granted by a probate court. If the deceased had a valid will, the person named to manage the estate is the Executor, who will need to obtain “Letters Testamentary.” If there was no will, the court will appoint an Administrator, who will receive “Letters of Administration.” Both Letters Testamentary and Letters of Administration are official court-issued documents confirming the individual’s legal authority to act on behalf of the deceased’s estate.

The process for obtaining these letters involves filing a petition with the appropriate probate court, often accompanied by the original will (if one exists) and a certified copy of the death certificate. The court reviews the petition and, if approved, issues the Letters, which serve as formal proof of authority needed to interact with financial institutions and other entities holding the deceased’s assets. Additionally, an Employer Identification Number (EIN) may be required for the estate, particularly if an estate bank account needs to be opened or if the estate generates income. An EIN, obtained from the IRS by filing Form SS-4, acts as the estate’s tax identification number.

The Process of Releasing Funds

Once the necessary legal authority, such as Letters Testamentary or Letters of Administration, has been obtained, the process of releasing frozen funds from a bank can begin. The authorized individual, whether an Executor or Administrator, should contact the bank’s estate or deceased accounts department. Procedures can vary slightly between institutions, so it is advisable to inquire about specific requirements.

Generally, the bank will require presentation of the certified death certificate, along with the original or a certified copy of the Letters Testamentary or Letters of Administration. The Executor or Administrator will also need to provide personal identification for verification. After verifying these documents, funds can be transferred to a newly established estate account, if needed, or distributed according to the instructions provided by the Executor or Administrator, consistent with the will or court orders. Banks may also have specific forms that need to be completed to finalize the release and transfer of funds.