When a person dies, they leave behind an entire life. That life often includes a home full of personal belongings, loving relationships with family and friends, and countless memories. A life usually includes a complex web of financial accounts and banking information, too. And those accounts go on living, even after a person passes away.
Jump ahead to these sections:
- How Banks Find Out Someone Died
- What Happens to a Bank Account When Someone Dies?
- How Do You Notify Banks When Someone Dies?
So how does a bank find out someone has died, and what happens when they receive that information? Whether you’re in charge of a deceased relative’s bank accounts, or you’re getting your own financial accounts in order, it’s important to understand what happens to our accounts when we pass away.
Post-planning tip: If you are the executor for a deceased loved one, it's tough to handle both the emotional and technical aspects of their unfinished business without a way to organize your process. We have a post-loss checklist that will help you ensure that your loved one's family, estate, and other affairs are taken care of.
How Banks Find Out Someone Died
Banks don’t automatically know that one of their account-holders has died. So if you’re the executor of an estate, you should assume that the person’s financial accounts are still active.
A family member sends a notification
The main way a bank finds out that someone has died is when the family notifies the institution. Anyone can notify a bank about a person’s death if they have the proper paperwork. But usually, this responsibility falls on the person’s next of kin or estate representative.
To notify the bank about the death, you might need to provide a copy of the death certificate, as well as other documents and information about the deceased and yourself.
The account goes dormant
If your loved one’s bank account goes dormant (unused) for a long period of time, the bank won’t assume the person has died. But it will begin the process of closing the person’s accounts, just in case.
When this happens, and no next of kin or administrators have reached out to the institution, the bank gives any remaining funds over to the state.
Social Security sends a request
Funeral directors often inform Social Security about a death on behalf of the family they’re working with. You can also notify Social Security yourself.
Notifying Social Security about a loved one’s death makes sure the department stops sending Social Security checks. If Social Security issues a payment after the beneficiary passes away, that payment has to be returned.
Once Social Security learns about the person’s death, the department will compare the date of death with the payments issued. If a payment was issued after the person's death, Social Security will contact the bank to ask for the return of those funds.
If the bank didn’t already know about the person’s death at that point, this request from Social Security will alert them that the account holder is no longer living.
What Happens to a Bank Account When Someone Dies?
Closing a deceased relative’s bank accounts is important for preventing identity theft. But having those accounts closed may be easier said than done.
So once the bank knows that a person has died, what exactly will the bank do with that person’s account or account? Here’s what you can expect.
Payable on death accounts
If the person sets up a payable on death, or POD, account, the beneficiary can collect the account’s funds without going through probate. If you’re the beneficiary listed on the account, you’ll just need to provide your photo ID and a copy of the death certificate.
Even if you’re the decedent's power of attorney, you must also be named on their bank account as a beneficiary or joint owner in order to access their funds before going through probate.
If the beneficiary was someone else and they died before the account owner passed away, the bank usually releases the money to the executor of the estate. The executor can then distribute the funds according to the deceased person’s will.
Joint bank accounts
If the deceased person was a joint owner of the bank account, the surviving account holder often takes over full ownership. If a husband and wife open a bank account together, for example, and the husband dies, the bank will usually transfer full ownership over to the wife. The survivor can then opt to keep the account open or withdraw the funds and close the account.
Some banks handle this situation differently, though. Instead of transferring sole ownership to the surviving account holder, some banks freeze joint accounts when one of the owners dies.
Typically, upon receiving a death notification, a bank freezes the deceased person’s accounts, including checking, savings, and credit accounts. This makes it impossible for anyone to withdraw or deposit money from or to the accounts. Checks issued from the account are unusable, and automatic payments will cease.
The bank will keep the person’s accounts “frozen” until it receives authorization from a probate court.
In most scenarios, a bank can’t close a deceased person’s account until the estate has gone through probate. The probate court can appoint an estate executor or administrator if the deceased person didn't name one in his or her will.
Once the estate goes through probate, the legal executor can withdraw the deceased’s funds from their account and close the account.
Usually, the executor of an estate, once authorized by the court, will open a new bank account for the estate. The executor can then request for the deceased person’s bank to transfer those funds to the new estate account.
From that account, the executor can distribute the funds appropriately based on outstanding debts and the person’s will.
If the deceased does not have a will, and his or her estate is worth less than $15,000, the bank may forward the funds directly to the next of kin. But the bank has to be certain that the person is dead and that no one has applied for probate court to administer the estate.
Finally, the bank will close the decedent's accounts with the institution officially and completely. You should receive a letter of confirmation once the process is complete.
Make sure the bank has closed all of the accounts associated with your loved one’s name and social security number, including checking accounts, savings accounts, investment accounts, and credit card or loan accounts. You’ll need to pay off any open lines of credit before you can close a deceased person’s credit cards and loans.
How Do You Notify Banks When Someone Dies?
As mentioned above, the responsibility of notifying the bank about a death usually falls to the person’s family or next of kin. An estate-holder or executor may also be responsible for sending death notifications.
If you’re the person charged with sending a death notification to a bank, and you’re not sure where to begin, here’s how to proceed.
Contact the institution
Before doing anything else, reach out to the specific banking institution and let them know about your situation. They should provide you with next steps or mail you a letter listing what you need to do.
Obtain the death certificate
To notify any bank about a family member’s death, you’ll need to provide a certified copy of the death certificate.
Your funeral director will usually help you through the process of obtaining a death certificate. You can also request one on your own, usually from your regional vital records department.
You may be able to fax, mail, or email the death certificate, or the bank may require hand-delivery at a local branch. You’ll need to check with the bank to find out how they accept death notifications.
Provide additional information
In addition to the death certificate, you should be prepared to provide the bank with additional information.
This includes information about yourself, as well as your loved one’s social security number and bank account numbers. You may need to provide documentation showing that you’re legally responsible for the person’s estate, too.
Hold onto bank statements and documents
Keep track of all of the letters, statements, and other documents you receive from the bank. You should also hold onto any account documents you find within the deceased person’s belongings.
You might need to reference these statements when you’re filing taxes for the estate, as well as when you’re distributing funds as the executor.
Try to hold onto bank statements and documents for at least three years following the person’s death.
Sending Death Notifications
Banks aren’t the only entities or institutions that need to receive death certificates when someone dies. You also need to notify credit unions, insurance agencies, and more.
All of those notifications are easier to make if the person’s documents are in order and well-organized. You can help your next of kin or estate administrator manage your legacy by creating a detailed end-of-life plan.
- Porter, TJ. “What happens to a bank account when someone dies?” Bankrate. 16 September 2020. bankrate.com/banking/what-happens-to-your-bank-account-after-death/
- “Deceased customers’ accounts.” Banking Ombudsman Scheme. bankomb.org.nz/guides-and-cases/quick-guides/bank-accounts/deceased-customers-accounts/
- Kagan, Julia. “Deceased account.” Investopedia. 26 August 2020. investopedia.com/terms/d/deceased-account.