Deceased Customer-Bring Loan to Current

Question:

We were notified several months ago that a customer died. She had a checking account and a home equity loan with us, both singly owned. We have locked the checking account so no activity can occur on the account until we receive the proper paperwork from the PR of the estate. No payments have been made on the home equity since the death of the customer and now loan servicing wants to debit the checking account to bring the loan current and then to debit the account monthly for the payment. Is this permissible or advisable?

Answer:

Part of the answer to your question will depend upon what your documents say and what the laws are in this regard in your state. However, generally the process in this situation would be for the bank to file a claim against the estate of the deceased customer.

If you have a home equity loan, and the home was individually owned by your customer only, the estate would at least consist of the home and the bank accounts you mentioned. In most jurisdictions, this could be enough to require the opening of an estate for notification to creditors and distribution of assets to heirs. If you have not already done so, you may check the county records in the county where your customer resided to determine if an estate has been opened, but the PR simply has not contacted the bank yet. In most jurisdictions, it is also possible for creditors to force the opening of an estate; however, the bank may not want to incur the costs to do so.

You also might speak to the bank's counsel to determine what other options would be available under your state's laws.

First published on BankersOnline.com 7/15/13