When a loved one passes away, there are numerous tasks that need to be managed, including closing their bank accounts. This can encompass checking, savings, and retirement accounts. The process of handling these accounts can vary in complexity, influenced by several factors such as the type of account and whether you have legal authority to manage it.
Key Considerations for a Deceased Person’s Bank Account
To start the process of accessing or closing a deceased person’s bank account, consider the following questions:
• Did the decedent designate a beneficiary on the account?
• Was the account jointly owned with someone else (e.g., a spouse)?
• Did the decedent die with a will or a trust?
Understanding the Types of Bank Accounts
The nature of the account plays a significant role in how it is handled. For instance, is it a pay-on-death account or a joint account? A pay-on-death (POD) account automatically transfers to the named beneficiary upon the account holder’s death, bypassing probate. Joint accounts, on the other hand, typically transfer to the surviving account holder.
Do Bank Accounts Have Beneficiaries?
Some bank accounts have beneficiaries, while others do not. Most checking and savings accounts can be set up as transfer-on-death (TOD) or pay-on-death (POD) accounts, allowing the designated beneficiary immediate access to funds upon the account holder’s death. However, it’s not mandatory for account owners to name a beneficiary, and many may be unaware of this option.
In California, for a checking or savings account to be a TOD or POD account, the account holder should have completed a “Totten trust” document with their bank. Without this, accessing the deceased person’s bank account may become more complicated.
Do Bank Accounts Have to Go Through Probate?
Not all bank accounts must go through probate. Probate is a court-supervised process that authenticates a decedent’s will, appoints an executor or administrator, values estate assets, pays creditors, and distributes assets to beneficiaries. While probate has its benefits, it can be expensive, time-consuming, and challenging for grieving loved ones, potentially delaying inheritances.
Many people try to avoid probate by creating trusts, using expedited probate proceedings (e.g., small estate affidavits, Spousal Property Petitions), and designating beneficiaries on TOD and POD assets such as bank accounts, life insurance policies, retirement accounts, and annuities.
Unfortunately, banks often do not inform account holders of their right to designate a beneficiary. If an account has no beneficiary and isn’t jointly owned, it will likely become part of the decedent’s estate and go through probate. The executor or administrator can use the funds to pay valid creditor claims before distributing the remaining assets to the beneficiaries and heirs.
What Happens if No Beneficiary Is Named on a Bank Account?
Claiming assets as a designated beneficiary is relatively straightforward, but what happens if no beneficiary is named?
If there is no beneficiary, it’s crucial to determine if the decedent shared ownership of the account with someone else. If so, that person typically gains full ownership of the account. If there was no joint owner and no trust, the account may be subject to probate.
For some estates, there are ways to bypass formal probate and settle the estate, especially for small or simple estates or for transferring property from a deceased spouse to a surviving spouse. However, not all estates qualify for these expedited procedures. A probate attorney can help determine if the estate in question is eligible for these processes.
Finding the Bank Accounts
Locating all bank accounts held by the deceased is the next step. This might involve searching through personal records, bank statements, or online accounts. Sometimes, you might need to contact financial institutions directly to identify all existing accounts.
Accessing the Funds
Once the accounts are identified, accessing the funds depends on the type of account and its terms:
• Joint Accounts and Beneficiary Accounts: These accounts can be accessed by the surviving joint owner or the named beneficiary without going through probate.
• Probate Accounts: If the account does not have a beneficiary designation or joint owner, it becomes part of the probate estate. Only the executor or administrator appointed by the court can access these funds.
Common Challenges
It’s important to note that most bank accounts will be inaccessible to family members unless they meet the criteria mentioned above. For instance, probate attorneys often receive inquiries from adult children about accessing a deceased parent’s bank account. Unfortunately, unless they were joint owners or beneficiaries, they do not have the right to access these accounts directly.
Seeking Legal Advice
If you’re unsure about the probate requirements for a deceased person’s bank account, consulting with a probate attorney is the best course of action. They can provide guidance based on the specific details of the estate and help navigate the complexities of probate law.