What Happens to Your Bank Account When You Go to Prison?

When an individual faces incarceration, understanding how bank accounts are managed is important for maintaining financial stability. This guide explores the practicalities of managing bank accounts while incarcerated, offering insights into account status, accessibility, and other financial considerations.

Account Status and Accessibility

A bank account is not automatically frozen or closed simply because the account holder is incarcerated. The funds within the account remain the property of the account holder. However, direct access to these funds or the account itself becomes severely limited while an individual is imprisoned. Incarcerated individuals cannot use online banking, visit bank branches, or access ATMs.

Joint bank accounts operate differently, as the co-owner retains full access and control over the funds. This arrangement can provide a continuous means of managing finances from outside the correctional facility. However, an account might be frozen or seized if funds are linked to criminal activity, such as money laundering or fraud, or if a court issues an order for asset forfeiture or restitution.

Managing Your Account from Incarceration

Managing finances while incarcerated primarily involves delegating authority to a trusted individual. Since direct access is not possible, preparations must be made to ensure bills are paid and funds can be accessed. This often involves establishing legal arrangements and setting up automated processes.

Power of Attorney (POA)

A Power of Attorney (POA) is a legal document that allows an individual, known as the principal, to appoint another person, the agent or attorney-in-fact, to act on their behalf in financial matters. For someone facing incarceration, a POA is a tool for ensuring financial affairs can be managed externally. The POA must be executed while the principal has the legal capacity to understand and sign the document.

There are different types of POAs relevant for financial management. A “general power of attorney” grants broad authority, allowing the agent to handle almost any financial transaction, including managing bank accounts, paying bills, and making investment decisions. A “limited power of attorney” restricts the agent’s authority to specific tasks or for a defined period, such as managing a single bank account or selling an asset. POAs can be “durable,” remaining effective even if the principal becomes incapacitated, or “non-durable,” terminating upon incapacitation.

Choosing the right type of POA involves careful consideration of the scope of authority and duration. It is advisable to consult with a legal professional to draft a POA that precisely reflects the principal’s intentions and complies with applicable laws.

Automated Payments and Direct Deposits

Setting up automated payments for recurring expenses before incarceration can help maintain financial obligations. Bills such as rent or mortgage payments, utility bills, and loan payments can often be automated directly through the bank or service provider. This ensures timely payments continue without requiring manual intervention.

Direct deposits, such as Social Security benefits, pensions, or disability payments, continue to be deposited into the account. A trusted individual with appropriate authority, often granted through a POA, can then access these funds to cover ongoing expenses or manage them as instructed. Confirm with the bank and relevant agencies that direct deposit arrangements will remain active during incarceration.

Trusted Individuals

Selecting a trustworthy person to manage financial affairs is important. This individual could be a spouse, close family member, or a professional fiduciary. Providing them with the necessary legal authority, either through a POA or by adding them as a joint account holder, enables them to conduct transactions, pay bills, and monitor the account. Open communication with the trusted individual about financial obligations and expectations is necessary to prevent misunderstandings and ensure proper management.

Addressing Other Financial Matters

Beyond immediate management, certain long-term financial implications can arise for bank accounts during incarceration. These include account dormancy and ongoing debt obligations. Proactive measures can mitigate potential negative impacts.

Dormancy and Escheatment

Bank accounts can become dormant if there is no customer-initiated activity for an extended period, ranging from one to five years. When an account becomes dormant, banks may impose fees and, after further inactivity, the funds can be turned over to the state as unclaimed property, a process known as escheatment. Escheatment laws vary by state, but states hold these funds indefinitely, allowing the owner to reclaim them.

To prevent an account from becoming dormant, it is advisable to maintain some form of activity, such as arranging for small, periodic deposits or withdrawals, or ensuring the designated agent under a POA conducts transactions. Updating the bank with a current mailing address, even a correctional facility address, can also help ensure that any dormancy notifications are received.

Debt Obligations

Incarceration does not eliminate existing financial obligations. Debts such as credit card balances, loans, and child support payments continue to accrue interest and may be pursued by creditors. Creditors can initiate legal proceedings to collect outstanding debts, which could result in court orders for wage garnishment or, in some cases, bank account garnishment.

Maintaining a plan for debt repayment or management, even while incarcerated, is important to avoid further financial distress and negative impacts on credit. Communication with creditors, where possible, or having a trusted individual handle these discussions, can sometimes lead to temporary arrangements or modified payment plans.