We have a sole owner account where the owner died intestate and with no surviving relatives. We are going to put a hold on the $7,500 in the account and hold the bank statements until the account reaches a dormant status and the funds are escheated to the state.

Is there any other way this should be handled?

I'm not sure how a bank could ever know positively that a person died intestate, but that aside, I think placing the hold pending escheat is appropriate. That provides sufficient time for an estate rep to obtain Letters of Administration or Testamentary and attach the funds.