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What Happens to a Bank Account When Someone Dies?

After someone passes away, their bank accounts can follow various paths. These accounts might be transferred to a co-owner, or they could end up in probate court if no will is left. The outcome depends on how the deceased person managed their financial matters.

Scenarios for Bank Accounts After Death

Joint Account Holder

If you are a joint owner of the account, the surviving co-owner can usually take over the account without any issues. Most banks set up accounts so that the surviving joint account holder automatically becomes the sole owner.

Payable-on-Death Designee

In some cases, a beneficiary is designated through a payable-on-death arrangement. This means the account owner names a beneficiary who will inherit the account after their death. This can apply to checking accounts, savings accounts, and certificates of deposit (CDs).

Trustee

Some people establish a living trust as part of their estate planning. This legal arrangement allows a person to transfer ownership of their assets, including bank accounts, to a trust. The trustee then distributes the trust’s assets after the person’s death, bypassing probate court and saving time and money.

Executor

If you are the executor of the deceased person’s estate, accessing the bank account is more complex. The executor, named in the will, must get permission from a probate court to withdraw money and close the account. The court will require proof of your role and a certified copy of the death certificate.

No Executor or Will

If no executor is named or no will exists, a relative or legal representative must seek permission from a probate court to access the account. Once granted, they present the official paperwork to the bank.

4 Ways to Avoid Probate on Your Bank Accounts

The probate process can be lengthy. Here are four ways to help your beneficiaries avoid it:

1. Add a Joint Owner

Adding a joint owner, such as a spouse, ensures the accounts don’t end up in probate court. The surviving joint owner will take over the accounts after your death.

2. Designate a Payable-on-Death Beneficiary

When opening a bank account, you can name a payable-on-death (POD) beneficiary. This allows the beneficiary to control the account after your death without going through probate. Unlike a joint owner, a POD beneficiary has no rights to the account until the account holder dies.

3. Set Up a Living Trust

Creating a living trust to hold your assets, including bank accounts, can bypass probate. After your death, the successor trustee distributes the assets to the named beneficiaries. A living trust can be revocable or irrevocable, with the former allowing updates or revocation while alive, and the latter being permanent.

4. Give Away Assets

One way to avoid probate is to give away your assets while alive. By giving away the money in your bank accounts and closing them, these gifts won’t be part of the probate process.

FAQ

Can I Withdraw Money From a Deceased Person’s Bank Account?

If you are the joint owner, you can withdraw money immediately. Otherwise, you need documents proving legal access, such as:

• Government-issued ID (driver’s license or passport)
• Death certificate
• Small estate affidavit
• Letters of testamentary
• Letters of administration

How Long Does It Take for a Bank to Release Money After Death?

The time it takes for a bank to release money depends on the complexity of the estate and financial documents. It can be quick or take months or years.

The Bottom Line

Proper estate planning can ease the burden on your beneficiaries. Consulting an estate planning attorney or advisor can help ensure your bank accounts and other assets are managed according to your wishes, allowing your survivors to focus on grieving rather than probate.

For any mortgage-related needs, call O1ne Mortgage at 213-732-3074. We’re here to help you navigate your financial future with confidence.

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