Customer has a checking account and a small unsecured loan. After taking the loan, the customer dies. At the time of death, there are ample funds in the account to pay for the small dollar loan. No one has stepped forward as the representative of the estate. The loan is approaching 60 days past due. There is an argument brewing. One group says the DDA agreement and the loan agreement discuss right of offset and that death is a default on the loan. The other group argues that the right of offset ends at the customer's death. (The agreement is between the bank and the customer, not the customer's estate.)

I've read several of the threads regarding right of offset for a decedent's account. Most agree that the bank should file a claim against the estate. However, I've read several items that state the right of offset survives death, as does the security interest created in the account agreement and note. In looking for an answer in the KRS, I'm finding very little! Can or should the bank pay the full loan amount with the funds from the DDA? Could someone point me to the state law regarding this issue? Thanks!

I have a good enough background in this area to know that your bank's legal counsel will actually want to read all of the documents involved and look at the case law before expressing an opinion. There is no statute that answers this question.

Thanks Ken!