My mother-in-law recently passed away. She and her daughter had a joint checking account. My mother-in-law also had a line of creditaccount, just in her name only, with the same bank. Now that she is deceased, the bank is holding the funds from their joint account to pay for her line of credit account. Can the bank hold the funds from their joint account to pay towards the line of credit? The funds in the account belong to my sister-in-law, not her mom. We were told that the line of credit would go away when we contacted the bank after her death and nothing was mentioned that they would hold the rest of the funds in their joint account. We would like to know if this is legal to do because the only signature on the line of credit account was my mother-in-law's.
The bank may be legally entitled to use funds in the account to pay down the line of credit, if the line of credit agreement or a separate security agreement pledged the account as security for the loan. There also could be a provision of state law that would allow the bank to use those funds.
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The bank may be legally entitled to use funds in the account to pay down the line of credit, if the line of credit agreement or a separate security agreement pledged the account as security for the 