What happens to bank accounts when the owner dies depends...

What happens to bank accounts when the owner dies depends on how the accounts are titled. Credit: iStock

I've been advised that my spouse and I should have our Social Security checks deposited to different bank accounts because after a bank learns from Social Security that an account holder has died, it "locks down" the deceased person's accounts. Is this true?

Not necessarily. It depends on how the account is titled.

When the Social Security Administration learns someone has died, it stops direct-depositing his benefit checks to his bank account and electronically reclaims any benefit checks to him that were direct-deposited after his death. But a jointly held bank account remains active, automatically passing to the survivor. And accounts solely held by the decedent that were "in trust for" or, "payable on death" to another person, pass to that person as soon as the decedent's death certificate is presented to the bank.

The bank freezes accounts that were solely owned by the decedent and had no designated beneficiary until the probate court appoints an executor or estate administrator. The executor then transfers the frozen accounts into a new estate account, from which she pays the decedent's funeral expenses, taxes and outstanding bills, and ultimately distributes the remaining assets to his heirs.

Although deaths are often reported to Social Security by funeral homes, a decedent's family shouldn't count on that happening. They should promptly report the death to Social Security and the bank themselves, to claim potential survivor benefits and to start the process of setting up an estate account. It's illegal to sign the decedent's name to a check or charge expenses to his credit card, even if you're the heir. If family members must advance money to pay estate expenses, the estate account reimburses them after it is established.

THE BOTTOM LINE What happens to bank accounts when the owner dies depends on how the accounts are titled.

WEBSITES WITH MORE INFORMATION nwsdy.li/bankrules and nwsdy.li/reportdeath

TO ASK THE EXPERT Send questions to Ask the Expert /Act 2, Newsday Newsroom, 235 Pinelawn Rd., Melville, NY 11747-4226, or email act2@newsday.com. Include your name, address and phone number. Questions can be answered only in this column. Advice is offered as general guidance. Check with your own advisers for your specific needs.