Can a Credit Union Freeze Your Accounts If One Party Dies?

A credit union could freeze your account after the death of a spouse -- if the account is a joint loan account such as a home equity line of credit. Deposit accounts such as joint checking or savings accounts are not frozen when a spouse dies. Spouses on joint deposit accounts have equal rights to the accounts, with access continuing for the surviving spouse.

Considerations

Credit unions aware of a spouse's death may freeze credit lines to protect the credit union. The credit union may fear the surviving spouse does not have the income to afford credit lines based on the incomes of both spouses. This is especially true with a home equity line of credit (HELOC). Depending on the equity in a home, a couple may have a credit line of $50,000 or more in a HELOC. When one spouse dies, the credit union may freeze the credit line to prevent further spending. The Stanford Federal Credit Union -- for Stanford University faculty, students and others -- reports that terms of HELOC agreements allow the credit union to reduce or freeze credit lines "under certain circumstances." Credit Unions share some of the same lending standards as banks. The Federal Reserve Board reports that banks may freeze or reduce credit lines if they believe there is a "material change" in the borrower's finances.

Differences

Credit unions adhere to the same sound financial practices as banks but are usually willing to discuss major account issues with the credit union member before making a final decision. Credit unions considering freezing accounts because of a spouse's death may simply need an update of the surviving spouse's credit and financial information. After the review, the credit bureau may lower the credit limit some or not at all.

Disclosure

Credit unions are not automatically notified of a spouse's death, raising the possibility that the credit union will take no action on credit accounts if payments are made on time and balances are kept low. However, a spouse may decide to voluntarily disclose the death to avoid potential problems with the account.

Alternative

There are no options for overturning a decision by the credit union to freeze a credit account because of a spouse's death. The surviving spouse can seek loans from other banks or credit unions as an alternative. For example, a competing bank or credit union may offer a HELOC to replace the current line. However, the new lender would likely consider the same credit guidelines as the current credit union.