Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Thursday, August 30, 2012

Difficulties in Closing Bank Accounts Result in Zombie Bank Accounts

UnknownNow that automatic deposits and bill payments are linked to bank accounts, it is harder to close them. This difficulty was particularly evident in one California man's case. Four days after Richard Palmer Sr. died, his family went to the nearest California branch of Bank of America to close his checking account.  One month later, his account "sprang back to life, becoming what is known as a zombie account."  

His surviving family members had no idea that money was being automatically withdrawn from his bank account every month to pay outstanding loans to payday lenders. Those creditors planned going to keep taking money from the account indefinitely.  

This week, the bank changed their policy to state that a closed account will not release payments or accept deposits.  Because the previous policy allowed checking accounts to be reactivated by electronic transactions and the Palmers started the closing process under the previous policy, Richard's account still is not closed. In an attempt to fix the problem, one Bank of America representative made a fake withdrawal of $888,888.88 so the account is now on fraud alert. 

Palmer's account woes not only show how much harder it is to close a bank account, they also point out how hard it can be for survivors to trace the financial lives of the deceased as technology becomes more prevalent and paper trails become less utilized. 

Bank of America's spokeswoman said that customers trying to close an account need to allow time for any incoming debits or credit.  If the account holder is dead, the responsibility to handle these requirements falls to the executor of the estate.  In Palmer's case, the debt would first come from the estate if there are available funds.  If the estate is insolvent, the debt may be written off by creditors. Creditors often try to come after a surviving spouse for such debts, but the surviving spouse is not legally obligated to pay. 


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