02 Mar Why was this bank account frozen after owner died?

Q. My uncle recently died and I am helping my aunt settle his estate. They were married and had a joint checking account. Upon his death, the bank froze half of the account, made my aunt fill out a form, and asked for a copy of the will. I was under the impression that joint accounts belonged to the survivor, no rigamarole necessary. What’s going on here, and can it be prevented?
— Trying to help

A. We’re sorry to hear about your loss.

There are several things to know about how banks treat accounts after someone dies.

The general rule is that tax waivers — Form 0-1 — are required to transfer assets from a decedent’s name to a beneficiary following the decedent’s death, said Catherine Romania, an estate planning attorney with Witman Stadtmauer in Florham Park.

These waivers are usually not issued until any inheritance tax due is paid, she said.

However, there are exceptions.

First, there is a blanket waiver rule that releases one-half of the decedent’s account to the executor or surviving joint tenant without a waiver, Romania said.

Also, Form L-8 can be executed at the financial institution by a surviving joint tenant or designated beneficiary of the account if he or she is a Class A beneficiary — spouse, civil union or domestic partner, parent, grandparent, child, grandchild, or stepchild — and this will release the entire account, she said.

Romania notes that if the beneficiary is not a joint holder or designated beneficiary of the account but instead named in the will, then a copy of the will must be attached to the Form L-8, she said.

“Assuming your aunt was a joint holder of the account with rights of survivorship and was not a joint holder as a tenant-in-common, she should have merely had to produce the death certificate and completed the L-8 to have the entire account released,” Romania said.

The New Jersey Division of Taxation has published the rules regarding waivers on its website in order to educate the public, including financial institutions, with respect to the waiver requirements.

Email your questions to Ask@NJMoneyHelp.com.

This story was originally published in March 2024.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.