What happens to bank accounts in the event of death?

What steps need to be taken at the bank in the event of death, and what happens to the deceased’s bank account, safe deposit boxes and outstanding loans? myLIFE sheds some light.

Losing a loved one, especially someone you shared your life with, is a painful experience that can be tough to handle. There are so many administrative matters to be dealt with in a short space of time: declaring the death to the local authorities, informing an employer, notifying bodies such as the pension fund (CNAP), job centre (ADEM), social security fund (CNS) and insurers.

The deceased’s bank(s) also need to be contacted as soon as possible.

Notify the bank

The deceased’s bank must be informed of the situation. First of all, it needs a copy of the death certificate showing the exact date of passing. This is delivered by the local authority in the place of death. It is on the basis of this date that the bank can list all the assets and liabilities at the time of death.

Once it has been informed of the death, the bank is required to block all of the deceased’s bank accounts and assets.

Blocking of bank accounts and safe-deposit boxes

Once it has been informed of the death, the bank is required to block all of the deceased’s bank accounts and assets (current accounts, savings accounts, securities accounts, etc.).

Bank cards are frozen. Withdrawals and payments can no longer be made. Direct debits and standing orders are also stopped unless the deceased was married. However, money can still be paid in to the accounts.

Each bank applies its own terms and conditions to joint accounts. In some banks, they continue as normal; in others, they are blocked but still accept direct debits and standing orders. Other banks only lock the card issued in the deceased’s name, and let the other holder carry on as before.

Access to any safe-deposit boxes that the deceased may have is also blocked to ensure that nothing is removed without the heirs’ agreement.

The bank will then list the deceased’s assets at the time of death (balance of bank accounts, valuation of investment portfolios, outstanding loans, etc.) and the safe-deposit box numbers, then send this inventory to the notary so that it can be included in the declaration of inheritance.

Useful info: under certain conditions, the bank may pay the deceased’s funeral costs with money held in the account (upon receipt of an invoice, and assuming there are sufficient funds). Other costs (medical, retirement home, etc.) can also be settled with the deceased’s money, but only if all the heirs have explicitly agreed.

To unblock bank accounts, securities accounts and safe-deposit boxes, the bank needs to know the identify of the heirs.

How are bank accounts and safe-deposit boxes unblocked?

To unblock bank accounts, securities accounts and safe-deposit boxes, the bank needs to know the identify of the heirs.

It must be in possession of the death certificate and an official document establishing the order of succession, i.e. the names of the heirs. This could be a notarial deed or, if there is no inheritance tax to be paid, an exemption certificate from Luxembourg’s AED. If the deceased was a non-resident, then the documents to be submitted will, in principle, depend on the legislation of the home country. For a resident of France, this will be the notarial deed; of Belgium, the certificate of inheritance; of Germany, the Erbschein, etc. There is also a document valid in a number of European countries: the European Certificate of Succession (ECS).

The bank will also need the written agreement of the beneficiaries, indicating the instructions to be following when dividing up the estate.

If there is no tax to be paid, safe-deposit boxes can be unlocked with an exemption certificate, provided that all of the heirs are present. Otherwise, an inventory will have to be drawn up and the boxes can only be opened in the presence of an AED representative.

NB: if the deceased was a non-resident, the conditions under which safe-deposit boxes can be opened are different. The bank will need the notarial deed (or national equivalent) and all the heirs will have the be present.

What happens to outstanding loans?

The future of an outstanding loan (mortgage or personal loan) will depend on whether protection insurance has been taken out and on the presence of any joint borrower.

If the loan was in the deceased’s name only:

• • If the loan was insured: the insurer will repay the outstanding amount, backdated to the date of death, subject to its acceptance. It will first check whether the terms of the policy have been honoured.
  • If it was not insured: the outstanding balance will be added to the estate’s liabilities. The amount will then be deducted from the inheritance. If the debt exceeds the value of the estate, then it will be up to the heirs to repay it.

Useful info: the heirs are under no obligation to accept the inheritance. They may also waive their right to it or accept it subject to an inventory (if they are not yet aware of the deceased’s financial position or, for example, the presence of any debts).

If the loan was taken out jointly (e.g. by spouses):

• • If the loan was insured: the insurer will repay the loan on the terms of the policy (again subject to acceptance). For example: if each spouse was fully covered, the insurer will meet all of the remaining monthly instalments and the surviving spouse will have nothing left to pay. Equally, if each spouse was covered for their half, the insurer will repay the deceased’s share and the surviving spouse will still owe the remainder.

• • If the loan was not insured: an uninsured loan forms part of the estate’s liabilities. The bank may ask for it to be repaid in full from the estate. It can also agree to put the loan in the name of the joint holder or heirs, subject to a risk assessment.

Note about dormant accounts

In the event of death, some accounts may not be claimed or identified by the heirs. Since the law of 30 March 2022 on inactive accounts and safe-deposit boxes, as well as unclaimed insurance policies, banks have had to meet certain obligations.

If the holder of an account or safe-deposit box has not completed any transactions, used their account or contacted the bank for several years, then the bank is required to find the holder or their heirs. It must send reminders and carry out in-depth searches according to a schedule defined by law. If the person has not come forward after 10 years, the bank will transfer the account balance or contents of the safe-deposit box to the Caisse de Consignation.

You now have a better idea of procedures for a deceased person’s bank accounts, assets, safe deposit boxes and loans. Feel free to contact your bank advisor for more information on the subject, or for your own estate planning. You can also read BIL’s brochure: Practical information and steps to follow after the death of a loved one.