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Home >> Special Situations >> Deceased Individuals
Redeeming CD of the Deceased
If a person who had a CD dies, and the CD doesn't mature until a later time, will there be a penalty for the married partner to withdraw it?
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 If the CD was owned jointly by the spouses, or if it was owned by the deceased, but named the surviving spouse as a payable-on-death beneficiary, the surviving spouse becomes the owner of the account. If the CD was owned only by the deceased spouse, state law may allow the surviving spouse to withdraw the funds without requiring them to be processed through the decedent's estate. The bank will know whether it can permit such a withdrawal.
If a withdrawal can be processed under either of those scenarios, it will be up to the bank to determine whether it will impose a penalty for early withdrawal. Except for the first six days after a CD is opened or after a withdrawal from or deposit to the CD, any prepayment penalty is strictly a matter of contract, and the bank can waive its right to the penalty if it so wishes. Even during that six-day period, regulations permit the waiver of penalties if an owner has died, but again, the bank gets to decide.
Published on BankingQuestions.com 1/30/09
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