If the account is frozen, how does the executor pay for the funeral?

Seminar season is in full swing for me, making me doubly busy but also letting me interact with even more people than I usually do. I always encourage questions from my audiences, and always get plenty of them. I notice than many listeners are interested in the mechanics of  an estate - how things work, who does what, how long things take, etc.

At one recent seminar, there were questions about whether a deceased person's bank accounts are frozen at the time of death, and if so, whether an executor has to pay funeral and other expenses out of his own pocket.

If the deceased owned a joint bank account with right of survivorship, the account won't be frozen. The surviving joint owner will be able to continue to use the account as before. For tax, estate and other reasons, the surviving joint owner should make sure that the bank is alerted of the death of one owner and the name on the account adjusted to reflect the current situation.

If you are one of the thousands of Canadians who owns an account jointly with your parent or your child, be aware that there is no longer an automatic right of survivorship on these accounts. Though you may have been told by the bank when it was set up that there was a right of survivorship, the law has changed right across Canada. An inter-generational joint account where the parent put in the money and later added a child as a joint owner is considered to be held in trust for the parent's estate. That account will be frozen.

If you have an inter-generational joint account, talk to an estate planning lawyer or your bank manager to find out what you can and should do about it while both owners are still alive.

RRSP, RRIF and LIRA accounts are not generally frozen. They are normally paid to the named beneficiary. If they are payable to the estate, they may be frozen until the executor obtains a grant of probate.

The deceased may have had bank accounts or investment accounts in his or her own name. These account are normally frozen on the death of the owner. Once the executor obtains probate, the bank or investment advisor will release the funds to the executor.

As mentioned, the follow-up question to whether an account is frozen is whether an executor must pay estate expenses out of his own pocket. In particular, funeral bills were a concern, as they tend to amount to thousands of dollars. The good news is that if an executor or family member takes the funeral bill to the bank where the deceased held his account, the bank will pay the funeral bill directly from the deceased's money. The money won't be given to the executor or family member; it will be sent directly to the funeral home.

This holds true for other expenses as well, as long as they are obviously bills that the deceased would have had to pay, such as the utilities on the deceased's home. This is up to the individual bank branch to determine, but it's always worth asking.