It took an overdraft of $888,888.88 to stop one man’s zombie bank account.
Four days after Richard Palmer Sr. died at 78, his surviving family members drove to their local Bank of America branch in Moreno Valley, Calif., to close his checking account. When they left the bank July 6, they had a summary showing that the account was closed. For his son Richard Palmer Jr. and his widow, Heidi, it was the first step toward putting grief behind them and starting to move forward with their lives.
But a month later the account sprang back to life, becoming what is known as a zombie account. And it's still not dead.
Palmer and his mother were shocked to find out the retired Air Force veteran was paying hundreds a month for outstanding loans to payday lenders like Easy Money and America's Cash directly from his bank account. Those payments threatened to keep sucking money from the account indefinitely, with the potential to cause overdraft fees, other penalties and real financial liability for his surviving spouse.
The bank's policy until this week allowed checking accounts to be reactivated by electronic transactions; now, policy dictates that a closed account neither releases payments nor accepts deposits. But for the Palmers, after three weeks, 22 people and five departments, the bank account is still not actually closed because the policy went into effect after they started the closing process.
Unable to officially close the account because of outstanding debts, one Bank of America representative used the strongest weapon available to make sure money didn't enter or exit the dead man's account, while the family sorted out the debts in probate: a fake withdrawal of $888,888.88 -- almost $1 million -- an internal bank maneuver that put the account on fraud alert.
"It’s just another banking transaction and I feel horrible that my mother is caught in this," Richard Palmer said in a phone call. "There is no timeline here" for how long the account could stay in limbo.
The family's experience reveals two key banking lessons in the digital era. First, closing a checking account is more difficult than ever because account owners can have multiple automatic deposits and bill payments attached to the account. Some banks allow accounts to be reopened when automatic bills or deposits reach the account, which has been an ongoing source of confusion and frustration for customers at many institutions.
But the Palmers' saga also reveals how hard it is for survivors to trace the financial lives of the deceased in the age of paperless financial transactions. "The unfortunate thing is that we are also finding out second life of senior citizen," said Palmer.
His father left no documentation about the payday loans in his records, the family said, which made the withdrawals not only surprising, but difficult to trace back to creditors who needed to be notified of his death. The bank has since provided contact information for the billers attached to the account.
Heidi Palmer, 69, who has been a joint owner since 2009 on the account, said she knew nothing about her husband’s finances or loans.
A spokeswoman from Bank of America said the bank does not comment on individual accounts, but that the protocol for closing an account for the living or the dead is the same. “Customers need to allow time for any incoming debits or credit,” Betty Reiss, a spokeswoman for Bank of America said. "Families should look at previous statements to see what those are."
Generally speaking, the responsibility to clear up financial loose ends for the dead falls to the executor of an estate. A bank account is subject to probate after the owner dies unless that account has a joint owner (such as a spouse), a named beneficiary or the account has been put into a trust. A joint owner can claim any funds in the account.
What happens to outstanding personal debt, like payday loans or credit cards, is murkier. If debt is taken out only in the name of the deceased, then the estate is responsible for it. The executor of the estate often must send a copy of a death certificate to creditors and debt may go through probate. If the estate is insolvent, that debt may be written off by creditors.
“Creditors attempt to come after [a surviving spouse.] They try to get the spouse to believe they are legally [obliged to pay] but they are not," said Judy Fox, an estate planning attorney in Concord, N.H.
Consumer advocates have been pushing for changes in the way checking account closures are handled by banks to make it easier for consumers to switch accounts. However, those changes could also help families of the deceased to close accounts as well.
In a report earlier this year, Consumers Union, which publishes Consumer Reports, gave recommendations aimed at helping consumers close banks accounts. It specified that Congress should amend banking guidelines to prohibit closed accounts from being reopened.
"I have no problem paying the debts of my father, but there is a proper procedure to go through with probate," Richard Palmer said. "We are trying to prevent liability to my mother."
Last weekend, Heidi Palmer said simply, "It's stressful. I want to move on."