A customer owned a small checking account - no joint owners. She passed away early 2011. Branch representatives knew of the death at that time. A flag was added to her account with the intention of freezing it. The flag that was used only blocks teller transactions, not system transactions like inclearing checks or ACHs. As a result, a recurring ACH has been debited every month until her balance is now close to zero. The situation has brought up the question of how we should handle an account like this. Should we totally freeze the balance when we learn of the death? Without knowing what type of agreement could be in place, do we allow ACHs to continue to post or return them all Account Frozen?

What to do with ACH transactions in such cases can be a difficult decision, particularly if there are transactions like utility payments, etc., continuing. However, the authorization for any such continuing transactions ceased to be effective upon the depositor's death.

It would have been correct to return the ACH entries received after you had knowledge of the depositor's demise using an R15 return code (Death of depositor). Use of Account Frozen would be inappropriate.

I just hated to see that her account balance was depleted, regardless of the fact that it was small and no one came in to claim it. For the future, then, it seems we should be safe freezing the account and returning ACHs. For some reason I thought R15 was reserved for government payments, but if not we will use that. Do we allow ACH credits to post or should we return those as well?

Credits could end up causing more problems if you suddenly get a reclamation. They should also be returned R15.

Thanks very much. I should have said we do return post-death federal benefits, but never have returned any other direct deposits.

I have a question about decedent's accounts - we have a few that haven't had an estate or family member come forward. The accounts have hit the one year inactive point and are starting to incur a monthly inactivity fee.

Deposit Ops said they cannot exclude individual accounts in our CORE system to not incur the fee. The only way to do so would be to change the date of last contact, but that wouldn't be accurate since we don't have a current contact, plus it would make it hard to know when it hits the escheate time frame.

We shouldn't charge inactivity fees to an account when the individual is deceased, correct?

Inactivity fees are a state law issue. Some states do not allow and some are silent on them.

So, if it's not against the law in your state then it is merely bad manners to take money out of a decedent's account because they have stopped initiating transactions.

Exactly.


PS never worked for a bank that charged an inactivity fee.

If no one come into the bank the funds will escheat to the state and the extra charges (if minimal) would offset some of the costs involved.

You would alway have the option to refund any charges when a Rep. from the estate claims the funds.

Of course, in some States if you charge inactivty fees, you can reverse them without jeopardizing those fees on the accounts that you do escheat.

And in others, you cannot charge inactivity fees on escheated funds if you ever reverse them for any customer.

You have to know what you state's rules are.

Thank you. I'll check our state law

Actually John, I meant to say can't. Thanks for clarifying that.