How to Avoid This Banking Nightmare

Most married couples have a joint bank account. But if your spouse dies, you may be surprised to find that the bank can freeze the account to protect your spouse’s estate. Here’s what to do if you find yourself in that situation—and how to prevent it before it happens.

Why a Bank Might Freeze Your Joint Account When One Owner Dies

A joint account doesn’t automatically establish the right of survivorship. Banks often freeze accounts when they’re informed of someone’s death. This happens when they get a notification from family, lawyers, the Social Security Administration (SSA), or the probate court.

Freezing accounts prevents any unauthorized use of funds and ensures that they are distributed according to the deceased’s last wishes. This is done through the probate process. You may find yourself in this situation if your account was set up with one of the following distinctions:

• Joint tenancy without the right of survivorship: This means that joint owners can use the account equally, regardless of who deposited the money, while you’re both alive. A bank will lock you out if your spouse dies to determine their rightful heir or beneficiary.
• Tenancy in common: This is a form of co-ownership where the owners can have a different share of the account. Just like an account without the right of survivorship, both of you have equal access when you’re both alive. If your spouse dies, their share may not automatically transfer to you unless you’re the named beneficiary. If no one is named, their share goes through probate.

How to Prevent Your Joint Account From Being Frozen

Set Up Right of Survivorship for the Account

Accounts set up with rights of survivorship generally don’t get frozen if your spouse dies. As such, you are both considered to have a joint tenancy with the right of survivorship (JTWROS). This means probate isn’t required for your deceased spouse’s share, so you automatically become the sole and legal owner of the account.

But don’t forget to notify the bank that your spouse is deceased. You should provide the financial institution with a copy of the death certificate. Your bank representative will take a copy of it, keep it on file, and remove your spouse’s name from the account. You can continue using the account as usual.

Name Each Other as Beneficiaries

You and your spouse can also ensure that you each have access to any accounts by designating each other as beneficiaries on a payable on death (POD) account. If you’ve done this, all you’ll need to do upon your spouse’s death is provide the bank with a copy of their death certificate to access the account. Then you can withdraw the money, use the account as is, or transfer the funds to a new one.

Steps to Take If Your Joint Account Is Frozen

If you find yourself locked out of your joint account, you can take the following steps to restore access.

• Contact your bank: You can start by calling the customer service line or going directly to your bank branch and speaking to a representative. If you have joint accounts at multiple institutions, make sure you reach out to each.
• Provide a death certificate: This can help speed up the process and prevent any delays. You generally don’t need a copy of the will if the account has a right of survivorship. A will is required, though, to determine any assets that aren’t covered by the rights of survivorship.
• Manage debts: You’re generally not responsible for any debts held solely by your spouse after they die. But you are responsible for any joint debts you hold, any debts that you co-signed on for them, and any debts outlined according to your state. If you’re unsure, speak with a financial expert or lawyer.

Keep in mind that if your spouse had debts separate from you, their estate is generally responsible for paying them off. If no money is left after any survivors are paid, the debts typically go unpaid.

The Bottom Line

Taking control of your finances before you or your spouse die can ensure your accounts function without any interruption. One way to do so is to open joint accounts that give you the right of survivorship after the death of your spouse. If you don’t, the bank could freeze your account until the account goes through probate. This could prevent you from accessing the funds, paying your bills, or even doing routine things like checking your balances.