When an account holder dies, her relatives and friends are often left to handle the details, including closing bank accounts. Bank accounts should be closed as soon as possible after death, but doing so isn't always a cut-and-dry process.
If the account in question belongs solely to the deceased, the bank will not allow anyone else to alter it or touch the funds within until the court grants authority over the estate to an executor. Only then can the executor, and only the executor, access the funds to use as he sees fit toward the payment of final expenses, debts owed and, finally, inheritance. If the account is joint or has a living trust attached, the person named on the account paperwork is authorized to close it on her own. No special paperwork or death certificate is required to do so -- only the request of the joint account holder or living trust.
Single-holder accounts are harder to close than joint accounts or those with living trusts. Since only the deceased has legal access to the funds, the court will have to grant someone else the power to withdraw the money and close the account. If there is an estate executor named in the will, she will have to produce proof of her status and a death certificate before the bank will provide access to the account for closing. If not, a relative or legal representative must file a request for permission to close the account with the probate court in the area where the deceased lived. The court will issue a Letter of Testamentary if there is a will involved, or a Letter of Administration if there is not. Once the appropriate letter has been received, it has to be presented to the bank along with a copy of the death certificate. The bank will obey the court's order to allow the person named in the letter to access the funds, and the account can then be closed.
When a person dies, it is up to the executor of the estate or the next of kin to inform all originators of automatic payments -- Social Security, pensions, dividends, etc. -- that the beneficiary is no longer alive and that the payments should stop. In some cases, the funeral director may notify depositors as a courtesy to make sure the grieving family does not forget to do so.
In some cases, bank policies and bank computer systems will cause an account to reopen if a deposit is received. You may think that a closed account no longer exists, and so all payments will bounce back and be returned. This is often true, but in some banks, any automated payments that make their way to the closed account will be deposited and will spark the account back to life. Since banks stand to make money from the deposits, there is little chance they will refuse them.
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