What happens to a bank account when someone dies

The first thing a bank does when it hears that a customer has died is protect the money. What that means depends on whose name is on the account. An account in one person’s name is frozen until the right person can prove they are entitled to deal with it. An account shared with someone else carries on, in the survivor’s name. Almost everything else follows from that difference.

An account in their name alone

As soon as the bank is told, it freezes the account. Direct debits and standing orders stop, so the gas, the phone and the council tax will need paying another way; most banks will give you a list of what was cancelled. Payments into the account, such as a pension, are sent back to whoever paid them. The cards and the cheque book stop working. Interest still builds up on the balance until the account is closed, but charges and overdraft interest stop.

The money stays there until the executor named in the will, or an administrator if there is no will, shows the bank they have the right to deal with it. A power of attorney does not help here: it ended at the moment of death, however recently it was used.

A joint account

A joint account is not frozen. The money belongs to the surviving account holder from the moment of death, so they can keep using the account, the cards keep working and the direct debits carry on. The bank will ask to see the death certificate so that it can take the name off the account. The money in a joint account does not pass under the will, although the dead person’s share still counts when working out whether Inheritance Tax is due.

How to tell the banks

Registering the death and using Tell Us Once informs the government, from the tax office to the passport office, but it does not tell any bank. For the banks, the Death Notification Service, set up by the banking industry through UK Finance, lets you tell many banks and building societies with a single form, free of charge. It only passes on the news: each bank then writes to you with its own list of what it needs. If you think there may be old accounts nobody knew about, My Lost Account searches banks, building societies and National Savings and Investments at once.

Paying for the funeral

This is usually the most urgent question, and the answer is reassuring. Almost every bank will pay a funeral director’s bill straight from a frozen account, before probate, as long as there is enough money in it. You take the death certificate and the funeral director’s itemised invoice to the bank, and the bank pays the funeral director directly.

The payment goes to the funeral director, not to you. If a relative has already paid the bill from their own account, the bank will not refund them at this stage; they are repaid later, from the estate, as one of its debts. So if you can, give the invoice to the bank before anyone pays it. If a Funeral Expenses Payment from the government helped with the cost, it is recovered from the estate once the estate is settled.

When the bank asks for probate

Probate, called confirmation in Scotland, is the legal right to deal with someone’s estate. Whether a bank asks to see it depends on how much is held with that bank. Each bank sets its own limit, and the limits vary a great deal, from a few thousand pounds to about £50,000, counted across every account the person held with that bank. Below the limit, the bank will usually close the account and release the money in return for the death certificate, identity documents, its own bereavement form and a signed indemnity, which is a promise to repay the bank if someone with a better claim comes forward. Above it, the money waits until probate is granted.

If Inheritance Tax is due, it has to be paid before probate can be granted, which can seem impossible while the money is frozen. The Direct Payment Scheme solves this: using form IHT423, you ask the bank to pay the tax to HM Revenue and Customs directly from the account.

Debts

Debts are paid from the estate, the money and property the person left, before anything goes to the people in the will. Family members do not inherit debts and are not asked to pay them from their own money. The exception is a debt taken out jointly, such as a joint loan or a joint overdraft, which the other borrower remains responsible for. If the debts are larger than the estate, the creditors are paid in a fixed order as far as the money goes, and whatever is left unpaid is not passed on to the family.

What to do first

Find the bank statements and cards, and make a list of every bank and building society involved. Register the death, which gives you the certificates the banks will ask for; order several copies, because each bank will want to see one. Tell the banks, through the Death Notification Service or one by one. Ask each for the balance at the date of death and for its requirements. Keep a note of every payment made from the estate, and the date, because as executor you will need to account for all of it.

What to do when someone dies sets out the first week in order, and who to notify when someone dies lists everyone beyond the banks.