I heard that upon the death of the owner, a CD can be withdrawn without a penalty. What if the owner is a grantor trust and the grantor dies?
Whether or not a bank will allow a penalty-free withdrawal in the event of an owner's death is a matter of contract and/or bank policy. There is no law or regulation at the federal level that requires it.
However, if a grantor trust owns the CD, the trust doesn't die when the grantor dies. The trust either continues in existence as an irrevocable trust, or is dissolved by a successor trustee according to its terms. The bank still has discretion concerning any early payout of the CD in such cases.
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Whether or not a bank will allow a penalty-free withdrawal in the event of an owner's death is a matter of contract and/or bank policy. There is no law or regulation at the federal level that requires it.