What Happens to Your Bank Account When You Die?

Although no one wants to think about death, it’s important to be financially prepared for it, so that your money ends up in the right hands. But it can sometimes be confusing to figure out where your assets will go after death. Will there need to be a probate? Who will deal with settling your affairs? And how will your bank accounts pass after death?

What happens to your bank account upon death depends a lot on what you do with it during your life. A number of factors influence what happens with your money upon death, including whose name is on the bank account, whether it’s held in a living trust, and your state’s laws. Here’s a guide to help you figure out where the money from a bank account goes after death so that you can make an informed decision about what you want to do:

Joint account
Generally speaking, if you have a joint account with your spouse that is in both of your names, upon your death, your mate becomes the sole owner of the account. In most cases, you won’t need to go through probate (a.k.a the official proving of a will) before the account is transferred to you.

Payable-on-death beneficiary

If the bank account is in your name alone, but your spouse is named a “payable-on-death” beneficiary of the account, he or she can take over ownership of the account. All they have to do is show the bank your death certificate and the account will be given to him or her.

If you have created a living trust to avoid probate proceedings after your death, then your bank account is owned by that trust. The person you name to be your successor trustee will take over once you pass away and the funds will be transferred to the beneficiary you have named. Your spouse may have to fill out a few forms and show the bank your death certificate.

Power of attorney
Your bank account may be in your name only, but you can give your spouse the ability to access the account through power of attorney. However, as soon as you pass away, your spouse’s right to access those accounts go away. Banks will have different policies about how to handle the account after a person’s death.

The bank may have separate authority to give you access to the account (if it’s a joint account), allow access if you can present a death certificate along with a notarized affidavit of assumption of duties, or allow the executor of a will to access it. If you can’t access the account, you may have to get permission from a probate court judge.

Solo account
If you have an account in your own name, but don’t designate a payable-on-death beneficiary, the account will likely have to go through probate before money can be transferred. Depending on your state’s law and the value of your assets, you might be able to go through simpler, less expensive options. Check to see what probate options are available in your state.

Keep in mind that money in the bank account could be subject to taxes — federal estate, state inheritance, or even state tax depending on your state’s laws.

If the deceased person’s account isn’t one that’s joint or in a trust, be sure not to write any checks or pay any bills using the account. It is off limits until the estate is settled in court.

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