Employee's paycheck after death

DB · May 2004

An unmarried employee died on Monday. A final paycheck for the days worked, sick/vacation payout will be processed on June 4 (the next normal payday). The employee had direct deposit. Our payroll person wants to produce a hard check. Absence any contact from an executor or other legal paperwork, can we do that?

Parabeagle · May 2004

I think you would almost have to do a hard check. Since he was on direct deposit, assuming he was the only signer on the account, no one else would be able to access the funds until they jumped through the proper hoops with the bank. Check with your state Dept. of Labor. I have had to deal with this issue once and the state in which the death happened (Washington) had some very specific requirements regarding the disposition of a dead employee's final pay.

Have you attempted to determine who the executor of the estate is? Did the employee have a will?

DB · May 2004

I don't have any information about a will or an executor and I don't want to contact the family about that until after the funeral. The beneficiary listed for life insurance died about one year ago.

If we do a hard check, who would we give it to? Would we hold it until the executor/will information is clarified?

Whatever · May 2004

You need to check your state regulations on who the check is issued to. Probably it has to be made out to the Estate of... or some variation of that.

Parabeagle · May 2004

Again, check with your state DOL. In all likelihood the check will be payable to the spouse; if no spouse, to his children; if no children, to his parents; if no parents, in accordance with the laws of succession in your state.

marc · May 2004

We had a similar circumstance three years ago. We went ahead and let the direct deposit go through. The estate has to deal with whatever money is in the account anyway. We did not seek legal advice, just did it. We could have been way wrong but never got any negative feedback from our actions.

Shadowfax · May 2004

I'd do exaactly as marc did. Just do as you were directed. Whyu create a problem where ther is none. Direct deposit and you are finished with it. The estate will pick up the account and handle it. You're thinking way too hard.

Bill ONeill · May 2004

How about simply cancelling Direct Deposit and making the check out to "Estate of John Jones" ?
Then mail it to the last address on record.

Sweet Pea · May 2004

Having worked for the past couple years as a Death Benefits Specialist in IL, I hope to share some insight. You have two best bets - 1)hold the funds and issue a hard check to the Estate or 2)let the direct deposit go through. Option 2 has always been the better (and often easier) choice. Let the check be released to the account. If the deposit does bounce back (as it will sometimes - banks can be very fickle with this issue), I then issue a hard check to the estate in care of the executor/executrix/administrator ONLY AFTER I receive Letter of Administration/Testamentary, Small Estate Affidavit, etc in order to CYA. I hope this helps.

Shadowfax · June 2004

Sweetlegumes Since you say the bank might not accept the direct deposit, presumably because they know their customer is deceased, on what basis, or by what justification does the bank refuse to accept the deposit? Geez I hate banks! In mi, all one needs to do is fill out an affidavit as spouse or other close next of kin, and you can cash the last paycheck without further hassle. GET OUTTA MY POCKET!!Probably some banker who asked his local wage and hour dept of labor nincommpoop what to do with the direct deposit, and he said...!Sorry Pork, Don's evil twin has temporarily invaded my body.

Sweet Pea · June 2004

My thoughts exactly! Your line of reasoning is pretty much on target - when banks hear of a death, they often times freeze the account. They don't necessariy (sp)close it, but do not allow deposits or withdrawls. In case of joint accounts, this usually isn't a problem, but in this case of a single person, it usually is. Again, this all depends on the individual bank. After speaking with many, many financial institutions over this same matter, most use Social Security check deposits as their first line of reasoning. Social Security checks are deposited on the first of the month for that month. If one is to pass away, the SSA goes into the account and withdrawls the entire months deposit (they do not prorate). Family members become irate at the bank for allowing this to happen and this can also create a negative balace when greedy family members go in to empty an account, thus creating problems for both the bank and SSA.

And trust me, even though MI is easy when you have the correct paperwork in order, nothing involving death and money owed is ever hassle free!

Don D · May 2004

Until I read Sweat Pea's post, I agreed with Marc, and I still do. She did add some good info though. It's not up to the employer to launch into tracking who the executrix might be or whether there was a will and a state department of labor has no legal expertise in this particular area. I've done what Marc suggested twice and on one other occasion I asked our labor lawyer, who guided us.

KAMINSKI · June 2004

According to the Department of Labor, the check should be paid to the executor of the estate of the deceased. This information can be obtained from the local county clerk of courts. The check should be made to the estate of the deceased person, e.g. "the estate of John Doe." Then the courts decide which family member is truly eligible to receive the check. Accrued wages and vacation pay of the deceased employee are not subject to withholding of federal income taxes. The earnings should not be recorded in the "wages, tips, other compensation" box of the deceased employee's final W-2. However, the FICA tax depends on the date of death. Wages and accrued vacation pay in the same calendar year as the employee's death are taxable. These payments should be included in the W-2. Wages paid after the calendar year of the employee's death are not subject to FICA taxes. However, if an employee dies before cashing a check that was paid while they were still living, the check should have federal income taxes and FICA taxes withheld. You should reissue the check to the estate of the deceased employee for the net amount of the check previously issued to the employee before their death.

Don D · June 2004

So it pays to die on New Year's Eve knowing that a check will not be cut until the next calendar year? I've made a note.

Dutch2 · June 2004

'bout the same here. We have had this happen twice. On both occassions with advice from our co. attorney, we let the direct deposit go through as usual. The money ended up in the estate and then the family and lawyers were resonsible to settle who got what and how much.
Good luck.

Rockie · June 2004

We do the same. Just let the direct deposit go. If, for some reason, there was no direct deposit, then the check should be made payable to "Estate of". The spouse or "next of kin" is not necessarily automatically entitled to these funds, especially if the individual dies without a will.

Employee's paycheck after death

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