Is a Bank Account Frozen After Death?

When the owner of a bank account dies, the bank does not necessarily freeze that person's bank accounts. However, if the bank becomes aware of the account owner's death, it may freeze that person's account as a precautionary measure to prevent anyone from making unauthorized withdrawals. Typically, banks only freeze single ownership accounts as opposed to joint accounts.

In the past, bank employees often read about the deaths of account owners in the obituary pages of local news papers. In 2011, many banks are multinational corporations and banks typically only freeze accounts if someone provides the bank with official notification of an account holder's death.

When someone who receives a Social Security direct deposit dies, the Social Security Administration usually notifies the bank, and a bank may freeze an account as a result of this notification. Banks also freeze accounts if a relative or friend of the deceased provides the bank with a certified copy of the deceased's death certificate. However, rules relating to the freezing of accounts vary from state to state.

Typically, the owners of a joint bank account have rights of survivorship. This means the money deposited into the account belongs to both of the owners, and if one account owner dies, the surviving owner gains full control of the account. A bank cannot freeze a joint account with rights of survivorship when one owner dies because doing so would prevent the other account owner from having access to the funds in the account.

You can establish a single ownership account as a payable-on-death (POD) account. With a POD account, you add the name of one of more beneficiaries to your account. The beneficiary has no access to the account while you are alive, but when you die, the beneficiary takes control of the money in the account without having to go through probate. If a bank receives notice that someone with a POD account has died, the bank may simply close the account and disburse the funds to the beneficiary rather than place a freeze on it.

While laws in most states require banks to open all joint accounts as rights of survivorship accounts, some states still allow people to open joint accounts without rights of survivorship. In such an account, each owner only owns a portion of the money, and when one owner dies, his portion of the money becomes part of his estate. A bank may freeze a joint account without rights of survivorship until issues relating to ownership rights on the account have been resolved. Otherwise, the bank could face legal issues if the surviving owner depletes the account. As with most account rules, the laws vary from state to state.