LEARNING THAT YOUR SAVINGS ARE FROZEN MAY CAUSE FINANCIAL STRESS
When dealing with the loss of your spouse life can be turned upside down especially when you are trying to use money that you have no right to get access to without following a process.
No one expects a financial officer to tell them that their late spouse will have a frozen bank account which includes all the family savings. It’s certainly a stress not needed after death but very important to understand why and the implications.
This exact scenario happened to my mother-in-law recently and I hope today that we shed some light on her situation in hopes of inspiring other couples to educate themselves about their finances before death. Even if you are named the executor in a WILL you still need to jump through legal hoops to unfreeze the bank account.
Sadly, a frozen bank account happens quite often according to the banking representative we met with especially for couples who choose to bank separately. This sort of lit a fire under our butts since all of our bank accounts are not joint bank accounts.
The costs of a funeral can run into the thousands of dollars and without money how will you pay for that funeral with a frozen bank account? Luckily if you don’t rely on a savings account to pay your bills or funeral costs you may have the time to wait out the process to unfreeze the account.
Banks freezing accounts
Although the financial institution where the deceased banked most likely will pay the bill of the funeral from the frozen account if there is money available. If you bring in the required documents such as a notarized death certificate, WILL and funeral bills from the frozen bank account.
It’s my understanding that the bank has some form of authority with the money as they go through the process of probate or lifting and transferring names on a frozen bank account.
We didn’t have to worry so much about this as my father-in-laws funeral was not being paid out of his savings account. Since my mother-in-law is retired and only earning a small amount of government pension the money in that savings account would be a huge help for her.
Luckily his funeral was paid from other means but again another process of releasing money was completed along with lots of paperwork. Until then there was no other money to pay for the funeral which put pressure on the family to pay for any upfront bills.
Someone still had to pay for funeral deposits and they don’t come cheap. Let’s just say the bill we recently received was a shade under $30,000. Even a simple funeral service can cost hundreds to thousands of dollars depending on how simple or posh the funeral. I will explain in an upcoming post for this series about funeral costs and different types of funerals and burials.
What happens with a frozen bank account?
There is a pretty simple answer, pretend your money is rock solid in an ice pit and you can’t reach it without calling in the big guys to help chisel it out. It’s like dangling a steak in front of a dog because you can see the numbers in the bank account but you can’t touch them.
Sounds a bit daft but we’re going through the process of a frozen bank account right now with my mother-in-law. You typically don’t need a letter to unfreeze a bank account after the death of your spouse however you do need to go through a process which might see you with financial hardship.
If a bank account at the time of death is joint there will be a right of survivorship where the bank account won’t be frozen. Basically this means both your names are on the bank account and the surviving spouse continues to use the bank account as they did before. This is how it went down for their joint chequing account which worked out in her favour.
You still need to declare the death of your spouse with the bank through the estates department. However, if there is a bank account without one it will be frozen. The executor of the WILL must get probate first before the account funds are released.
What is probate?
You want to make sure that assets of your estate aren’t part of probate by planning in advance. Probate as explained to us by our estate lawyer simply means a legal process of asset distribution of a person after death. Most often you can avoid probate by naming a beneficiary, adding Trust and having jointly owned assets including your bank account.
This is an excellent article about How to Avoid Probate In Canada along with steps and photos.
What documents must you provide the bank after a spouse dies?
This may be different for specific situations but I will list below what we had to provide the bank for my father-in-law.
- Surrender his bank cards and credit cards with the specific bank only (you must cancel all other remaining credit cards in his/her name only which is another process in itself that I will explain in another blog post.
- Proof of death, Notarized original death certificate
- Provide a copy of the Will
- Identification of the executor of the WILL
Waiting for a frozen bank account to be released
Since my father-in-laws bank account was all cash we are simply waiting for the banking officer to sort out the estate paperwork and transfer the money. This she said could take a while since there were over 100 other estate accounts she was dealing with.
Not so much fun when you are in need of that money. The good news for my mother-in-law is that she had no idea there was a safety cushion of money saved by my father-in-law just in case something were to happen. I suppose this was his emergency savings and her saviour.
This wasn’t the only surprise we uncovered and sadly my father-in-law died not knowing something about his finances that I want everyone to know about. This will come in another blog post for this estate planning series along with outrageous banking fees and much more.
My mother-in-law is not the best with saving money which is why they had the separate bank accounts. He worried that she would spend it all so the only access she had was to the joint chequing account to pay for bills each month. She did this old school by going into the bank and using a passbook.
My father-in-law would also go into the bank every month and transfer funds to the joint account to pay for the mortgage and house insurance. Just to think about the painful process of doing this every month still bothers Mrs. CBB and I both. This is why it’s so important for couples to discuss money but often things like this are hidden because of misuse of money by one spouse.
PLUS… we also found out this tidbit of important information below which will affect our family potentially at some point since the joint bank account also holds the kids names.
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. – Source: Estate Law Canada Blog Spot
Whichever comes first retirement or death you must be prepared
Retirement is something that everyone in Canada should be considering from a young age because it’s going to happen whether you like it or not. What we do know is that when we no longer are able to work or decide to retire there needs to be an income flow to sustain living expenses at lease for budget basics.
If you want to live the rest of your years travelling or exploring our beautiful country in Canada that also requires some form of extra money. All this is fine and dandy but don’t make mistakes that might land you in the land of the frozen bank account.
Over the past six years of blogging I have heard reasons from my readers why they choose to have their own bank account and forget the traditional joint bank account. Most often it is for privacy reasons because couples want to be able to spend and save their money as they see fit especially if they are not married.
What happens is the bills are split however the couple decides to divide them and each pay their portion. Seems like a solid plan but honestly it can get very confusing whether you’re married or not.
How do I know? Well, we were doing this since I moved to Canada from the UK but our reasons are far different than the above. Our situation revolved around myself building a credit history and credit score in Canada which I have done but still continued to bank partly on my own.
Holding a separate bank account often continues even after a couple is married because they’re used to it or they don’t want to make changes to their budget and they way they run their finances.
It probably just works for them and change for many people is tough especially when it revolves around money. This is why estate planning is critical and something I will be talking more about on the blog as I create my Ultimate Guide For Estate Planning in Canada.
If you’re common-law or married you may want to consider getting legal advice including talking to your financial institution about how money gets allocated and to who when one or the other dies.
Every bank will have an estates department who deals with death and living wills so if you don’t want to make a special appointment with a banking representative you can at least call and enquire. Personally, I’d suggest sitting in with your banking officer and having a chat.
This is also a great time to set up a WILL with your legal team because without a Will you’ve opened up the flood-gates to hell. There are couples who are deeply in love but have no desire to marry but want their assets to go to each other. This must be stated in a Will but that’s not all. Consider your bank account to be frozen if you are both not jointly named on the account.
Yes, that’s correct and all that money you’ve tucked away in a savings account that your wife or husband holds will no longer be accessible until the bank melts away the ice.
In the meantime we continue to research and learn as much as we can so we’re prepared for ourselves and our for our son in the event something should happen. We certainly wouldn’t want him to go through this process as it has taken its toll on us physically and mentally. In light of what we have learned we’ve since changed out bank accounts to all joint to avoid any of the above situations with a simple phone call to our banking institution.
Don’t wait until it’s too late for estate planning because a frozen bank account is money you have but don’t have.
Please don’t take the above as any form of legal or financial advice and talk to the professionals as this is only our story and what we’ve been through and experienced.
Bank of Montreal Guide to Estate Settlement is a good read for Canadians whether you bank there or not.
Discussion: Please share your experiences in the comment section below dealing with a frozen bank account and what process you went through to remove that status.
Where our money went in March
In March we finished up paying for expenses from the funeral that were directly associated with our family and not to be paid back from the estate. This is everything from funeral clothing to partial payment of the flower arrangements that were purchased that came at a hefty cost.
Our monthly net income seems to be hovering around the same amount each month which makes budgeting far easier for us as does not working so much. I can’t even express to you how happy I am that I’m not doing the hours I used to even though they did pay off for me in the end.
We made a few trips to play centres for our little guy and daycare is going great for him which works out perfect for us. Planning for his arrival into junior kindergarten might not be as challenging as we thought however I’m sure once he sees the classroom panic mode my set in. Any tips from parents out there would be great! Perhaps I may create a blog posts with all of your tips.
My allowance was over budget this month and it was all because of the beer. For some reason , likely stress I’ve been drinking more beer so I’ve cut that out until summer. My allowance can’t take it and luckily Mrs. CBB pointed out that drinking isn’t going to make the stress of everything calm. She’s right.
This post today I hope inspires each and every one of you to do one thing, budget and research your finances from a legal standpoint especially if you are married or hold any assets.
Have a great week everyone!!
Our FREE Simple Budgeting Series
Do you want to learn to budget like we do?
- How We Designed Our Budget Step 1– Gathering All the information
- How We Designed Our Budget Step 2– Budget Categories
- How We Designed Our Budget Step 3– Tracking Receipts
- How We Designed Our Budget Step 4- Note-taking
- How We Designed Our Budget Step 5– 5S Organization
- How We Designed Our Budget Step 6– Who Does What and When?
- How We Designed Our Budget Step 7– Balancing Our Budget
- How We Designed Our Budget Step 8– Knowing our Coupon Savings
- How We Designed Our Budget Step 9– Reading Our Bills
- How We Designed Our Budget Step 10– Projected Expenses
Budget percentages March 2018
Our savings of 29.36% includes investments as well as any savings for this month based on the income of $7174.23. We put money away for the projected expenses for things that need to be paid for in the coming months. The other categories were fairly normal this month, even if the Life Ratio is a little high and close the maximum. All of the categories took 100% of our income which shows that all the money we earned for the month is accounted for.
Budget percentages month by month
Breaking down expenses
Below is a breakdown of our expenses which helps us to understand where all of our money goes. Since May 2014 we’ve been mortgage free so much of our money will be directed at savings, investments and renovations.
I appreciate that you enjoy this budget update each month but I do hope you view this as an educational tool rather than comparing your own financial numbers as our situations are all unique. Spending less than we earn and budgeting our money has been the easiest way for us to pay down debt and save money. It may be different for you.
- Chequing– This is the bank account where all of our debt gets paid from.
- Emergency Savings Account– This is a high-interest savings account.
- Regular Savings Account– This is a savings account that holds our projected expenses.
- Monthly Budgeted Total: $5,376.40
- Monthly Net Income Total: $7,174.23
- (Check out our Ultimate Grocery Guide to see where our grocery money goes)
- Projected Expenses: These are expenses we know we will pay for throughout the year = $1,967.68
- Total Expenses Actually Paid Out: $4,258.47
- Total Expenses Actually Paid Out: Calculated is $7,174.23 (total net monthly income) – $1,967.68 (projected expenses) – $948.08 (savings in to emergency fund) = $4,258.47
- Actual Cash Savings going into Emergency Savings: Calculated is $7,174.23 (total monthly net income) – $4,250.47 (actual expenses paid out for the month) – $1967.68 (projected expenses) = $948.08
Time for the juicy category numbers and to see how we made out with our monthly budget. Below you will see two tables, one is our monthly budget and the other is our actual budget for the month of March 2018.
This budget represents 2 adults and a toddler plus retirement investments.
Budget colour chart
If highlighted in blue that means it is a projected expense. You will also see our budget does not include the emergency savings as it’s factored in at the end.
Monthly Budget for March 2018
Actual budget expenses for March 2018
I spotted an error above in the Christmas Reserve Food Fund where I forgot to put a figure in. I will do this next month.
Budget updates month by month
Just in case you missed our budget updates and want to do a quick search I’ve compiled them all on one handy page: monthly budgets. For the 2018 Year I will also keep track of each month below and update the monthly budgets page.
That’s all for this month check back at the beginning of April 2018 to see how we made out with our March budget.
Happy Budgeting CBB’ers!
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