Answer by Ken Golliher: IRS Revenue Ruling 84-73 requires the payor (your bank) to accurately allocate the interest paid between the decedent's name and TIN and the name and TIN of the surviving owner. Depending on your data processing capability, the easiest way to do that may be closing account A and opening account B.
Changing ownership and information reporting via file maintenance is a tad lazy and can generate problems for your bank and the customer.
Answer by John Burnett: Many banks allow the account to remain open in the event one of the joint owners dies, updating the ownership information (to include the TIN of a surviving owner). While closing the old account is a preferred practice, allowing the account to remain in place with updated information may encourage surviving owners to cooperate in the process (since no standing ACH or other orders need to be updated) more than they appear to be now.
First published on BankersOnline.com 10/1/12